Certificate of Deposits (CDs) are safe investment. This type of investment is suitable for those who want to begin an investment but quite afraid of the risk like losing their money. It is not like any other type of investment such as forex trading or stock investing which have both high chance of profit and loss. Certificate of Deposit is basically similar to a saving account but has higher interest and you are not allowed to draw your money over a set period of time. You can purchase it through banks, credit unions or financial institutions.
1. Safe and Secure Investment
The main reason why people really like this type of investment is that CDs are considered as safe investment. It is because FDIC fully insured deposit account with maximum amount up to $250,000 per account per bank. For those people who want to ensure their investment security, CDs can be a great option. In addition to that, it means that you can only have one deposit account at one bank. It means you can have multiple CDs at different banks.
2. Competitive Interest Rate
CDs offer higher interest than savings or checking accounts. Moreover, the interest rates of CDs tend to be stable unlike saving accounts which may fluctuate depending on the economic condition. CDs are not affected by the ups and downs of the money market. For example, if you have a 5-year CD, you are guaranteed that fixed amount of the interest rate over the five years, no matter what the market’s doing.
3. Deposit Length Flexibility
Basically, you can earn money through CDs when you lock your money for a certain period of time at a certain bank or credit union. This one of the unique characteristic of CDs offers you the length of time you want to invest your money. It can be 6 months, 1 year, 3 years, or 5 years or even more. This type of investment is really suitable for those who think long term ahead because deposits can give them real and stable returns. Also, you can predict how much return you will get prior to your set period of time.
Despite of those advantages of Certificate of Deposits, there is one fundamental thing you should know about CDs regulation. You are not allowed to withdraw your invested money before its maturity date. Early withdrawal of deposits may cause your accrued interest to forgo. Some financial institution may give you some withdrawal penalties which require you to pay a certain amount of money. However, some others may have different policies.