CD Saver, How To Become One

By: EconomyWatch Content Team   Date: 4 March 2010

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If you have never invested in a certificate of deposit, you need to understand some important things before becoming a CD saver.  With the current economy, saving money is more important now than ever before.  Instead of struggling, you can set up a plan to invest in certificates of deposits to allow your money to work hard for you.  Unfortunately, many people understand the value of becoming a CD saver but they have no idea how to get started, which leads to serious mistakes.

For starters, becoming a CD saver is always a good idea, especially in a tough economy.  When secured through a bank, the certificate of deposit savings account would be insured through the FDIC so your money would be protected.  Currently, FDIC coverage is good up to $250,000 but then at the end of December 2013, the protection amount will decrease to $100,000.  Regardless, a nice size investment would have federal protection.

Although some banks have minimum deposits, minimum daily balances, and charge fees, others are more flexible.  Therefore, to start as a CD saver, we recommend that you look at banks that have FDIC insurance, those without minimum deposit and daily balance amounts, and preferably a bank without fees.  From there, the next step as a CD saver is to find the bank that is going to pay the highest interest rate and compound the interest most often.

Because interest rates are a little lower than usual, some people believe it is more important to wait to become a CD saver until rates increase but this is a huge misconception.  Even if you do not lock into the rates you ultimately want, you would still be earning more on your money in a certificate of deposit than you would just sitting on it or placing it in a standard type of savings account.

Now, one way to become a smart CD saver is to start by talking to a representative at the bank where you current do business.  The reason is that often, when someone has a checking account, savings account, money market account, retirement account, etc, then a better rate would be offered when a certificate of deposit is purchased.  For this reason, always start with your own bank first and then branch out to see what other banks have to offer.

The truth is for any CD saver is that one of the lowest risk savings options possible is with a certificate of deposit.  In addition to looking at local banks, we also suggest that you look at CD types, terms, and rates associated with issuers online.  In fact, after working with your own bank, we strongly recommend that you then move on to online opportunities to see what issuers can do for you.

Anytime you become a CD saver, you are making an investment.  This could be short-term, perhaps six months to a year, earning extra money for a car, vacation, or some other purchase.  However, you could also invest serious money in a jumbo CD, locking the money up for as long as six years, which would give you the greatest return on the money you invest.
 


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