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CD (Certificate of Deposit) is like Fixed deposit, where you can invest certain amount for a specific period of time (max up to 5 years) with any Bank, or Credit Union with an interest rate. If you withdraw money from the CD before it's maturity date, you are likely to lose some interest. Generally, the longer you keep the money, the higher interest you will get.
CD's are also known as a Time deposit, and there is no fee to purchase it. CD's are one of the good ways to get a relatively high interest rate for your savings. The only condition is, that it is bound for some specific period of time. Though you can withdraw it before your maturity date, but will be charged an early withdrawal penalty, and will lose on some interest. Normally credit unions offers better rates than most of the banks. Terms and interest rates vary from bank to bank, or credit union to credit union. In many cases, the interest is not paid on a CD until it matures. However, for longer term CD's, interest may be credited to your account. Are they safe? What if the bank or credit union gets laid off? Normally, most of the banks and credit unions by default have the insurance with, Federal Deposit Insurance Corp, for your CD's. So you don't actually lose anything, but you should always ask more about this. Normally such condition doesn't occurs, if you make your CD's with some known and reliable Bank or Credit Union. For more details checkout: |
