Bank CD – what does it Entail?

Bank CD what does it Entail?

Bank CD what does it Entail?

Have you ever wondered which is the safest form of investment? It is a Certificate deposit known popularly as CD. It offers higher interest rate than your normal bank savings. It can be fixed for a period of time say, about a year, six months or more..You must remember one thing that if you withdraw the amount before the maturity dates you will have to pay a penalty for early withdrawal. If you want to reap profits from your investment, plan it wisely. Invest only if you think you can have them in your account for long. If not, opt for a shorter Certificate Deposit term.

Other than bank, thrift institutions also offer you these certificate deposit schemes. This definitely fetches you higher returns than having it in your savings account. Do you still think that you should have them in your savings account? Think twice, why not invest them in the right type of deposit than get 3.5% interest rate on your savings account annually. You will get better interest rates for a shorter period, roughly around six months.

Do not invest in hurry, you must make sure you have mentioned the term before you sign up for the form. If you have unknowingly committed yourself for a period of 5 years then your money will be stuck there for a longer period. Remember that you will lose out your principal amount incase you were to encash your CD much before its term. Find out what would the penalty be?

You should receive a disclosure document that tells you the interest rate on your CD and whether the rate is fixed or variable. Be sure to ask how often the bank pays interest for example, monthly or semi-annually. And confirm how you'll be paid for example, by check or by an electronic transfer of funds.

Fixed deposits are covered under tax exemption and are locked for five years duration. Be wise and make right investment which provides you better returns. Certificate of Deposit (cd) interest rate is calculated on the basis of 360 days per annum. You are free to choose the period or term of your deposit.

That doesn't mean you should just accept any CD rate that comes your way. You should still try to find a high interest CD rate. Your first step should be to compare what rates the online banks are offering. This can easily be done online at a rate comparison site. Try now!

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