Certificates of Deposit (CDs) have been around for a long time, yet they are often overlooked as a method of savings and investment. But they can be a very valuable and dependable way to invest your money without working with an investment advisor.
What is a CD?
Simply put, a CD is an investment where the credit union (or bank) gives you a higher interest rate than a savings account because you’re guaranteeing they can have the money for an extended period of time. It’s a contract that is made with an account holder and a financial institution where the money deposited into this account is to be held for a certain period of time with a specified interest rate. Generally, the time span is between one month and five years.
Interest Rates Generally Increase With the Time Commitment.
Generally, longer investment terms mean more interest earned. For instance, a 19-month term may have an APY of 0.05%, while a CD with a 37-month term may net a 0.75% annual return, and a 59-month term would net a 1.73% rate and 1.75% annual return.
It’s a Safe Form of Investing.
CDs are often considered among the safest investments because they can be FDIC or NCUA insured, similar to savings or checking accounts.
As long as you buy the CDs through an NCUA-insured credit union or an FDIC-insured bank, your investment is secure. Speak with your banker to ensure that your accounts and investments stay within the limits and requirements of the FDIC.
Learn the Penalties for Withdrawing Money Early.
The penalties vary depending on how far you are into your contracted time. If you have a 36-month term and you pull money out after only 12 months, your penalty will be much higher than if you had waited until you were 30 months in. If you can, look into other options for accessing money. And remember, if there’s a chance you’ll need the money in the near future, be wary when investing in anything beyond a savings account.
Green Country currently has great rates on CDs – check out our rate sheet. Ready to invest your money? Give us a call (or text us) at (918) 245-1301 to get started today, or come by one of our 3 locations.