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Not the best but the safest...Mar 30 '01 Write an essay on this topic.The Bottom Line A Certificate Of Deposit is a great short term investment to earn a little higher rate of return than a savings account. A Certificate Of Deposit is a safe and secure savings account that pays a higher rate of return than a basic savings and the funds are locked in for a specified period of time. Certificate Of Deposit Information A Certificate of Deposit can be opened at any bank with a minimum balance set by the Institution. CD's (short for Certificates of Deposit) are opened for different periods of time from 1 month to years. The rates of course are usually higher the longer you sign in for unless the Bank is offering a special promotion at the time. It is definitely a smart thing to call around for rates and shop the area before locking into anything. Every bank does things a little different so you may find something better some where else. During this period your money earns a set interest rate and yield until the maturity date. The rate is locked and cannot fluctuate during the term of the CD. Principal (the amount of money used to open the account) cannot be withdrawn without penalty until maturity of the CD. Interest can be withdrawn any time. Some Institutions offer monthly interest checks to be sent to you or deposited into another account. Upon maturity of the CD you have a specified number of days (grace period) to either roll the CD over into something else or to withdraw the funds without penalty. Some banks pay interest during this period and others do not. Final Thoughts Certificates of Deposits are a great way to save and give you piece of mind knowing that you will not lose any principal (FDIC insured up to $100,000) and it is a guaranteed rate for however long you commit for. The downfall of that is if the rates go up, your Certificate stays at the same rate and you are commited to keep your money in that CD until maturity. A CD is a great short term investment. The downfall is that the rates are not usually that great (around our area anyway). If your looking to put the money away for more than a couple of years, my personal opinion is to invest the money for a higher rate of return. I know this sounds silly with the stocks doing as poorly as they have been, but statistics do show if you play it out for a longer period of time with the right broker you can make a great rate of return.  |
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