CD Invest: CD Investing 101

For the subject of CD Invest: CD Investing 101, many different things need to be covered.  The one thing to remember is that certificates of deposit are a low risk way of saving money and because of interest being higher than with a standard savings account, you can enjoy a nice return on investment.  However, if you are like most people, you now live on a tighter budget thanks to the economy so you want to make sure your hard-earned money is making the most it possibly can.[br]

For the subject of CD Invest: CD Investing 101, many different things need to be covered.  The one thing to remember is that certificates of deposit are a low risk way of saving money and because of interest being higher than with a standard savings account, you can enjoy a nice return on investment.  However, if you are like most people, you now live on a tighter budget thanks to the economy so you want to make sure your hard-earned money is making the most it possibly can.[br]

First, for CD invest: CD Investing 101, this is the acronym for “certificate of deposit”, which is a type of savings taken out through a bank or credit union.  As mentioned, interest earned is much higher than you could make with other savings types.  Additionally, until December of 2013, you would benefit from protection from the Federal Deposit Insurance Corporation or FDIC up to $250,000 but after that time, protection will go down to the original amount of $100,000.

When you decide to invest in a CD, you would determine the amount you want to lock in for a set amount of time.  Keep in mind, each bank and credit union will have a different minimum requirement, some $1,000, and some $10,000.  The amount of time when you cannot get to your money is known as the term of the CD.  At the end of that term, the certificate of deposit would mature, at which time you would enjoy the interest earned.  You could then take some or all of the money out, or roll some or all of the money into a new CD.[br]

An important thing to remember for CD Invest: CD Investing 101 is that if you were to withdraw any portion of the money in the certificate of deposit early, you would need to deal with two scenarios.  First, you would be penalized a nice fee for early withdrawal.  Second, any interest accrued up to that point would likely be forfeited.  For this reason, it is essential that you invest only what you can actually afford to do without during the predetermined term.

We also wanted to cover the places from which you can get a certificate of deposit in this CD invest: CD Investing 101.  Typically, securing a CD with a bank is the best.  For one thing, banks offer great interest rates and usually have more flexible terms and conditions.  However, you can also take out a CD through a credit union, independent salesperson, and brokerage firm.

The benefit of using a brokerage firm is that negotiating a higher interest rate is possible but you need to know that only government entities such as banks offer FDIC insurance.  In other words, if you were to take out a $100,000 CD with a credit union, you would have no protection if the credit union were to fail.  On the other hand, if you took the CD out through a bank, then your money would be protected by the federal government.

Finally as a part of this CD Invest: CD Investing 101 article, you will find some long-term, high-yield Certificates of Deposit with call features.  In this case, the bank from which you secure the CD could terminate (call) the agreement after one year or some other set amount of time.  If a bank were to call any of the higher yield certificates of deposits, you would see a decline in interest rate.  However, if you chose a long-term certificate of deposit and rates were to climb, your CD would be locked in at the lowest rate.

Learn more about Certificates of Deposit Investment.