Key Takeaways
- Certificates of Deposit (CDs) are a safe investment option, providing fixed returns and FDIC insurance up to $250,000.
- CDs offer fixed interest rates until maturity, protecting against market volatility.
- First County Bank offers a range of FDIC-insured CDs with flexible terms to align with your financial goals.
A certificate of deposit account can help save and generate interest on funds, provided you won’t need the funds quickly. This article highlights some benefits of investing in a Certificate of Deposit (CD) account and why it may be a great time to consider one.
Safer Choice
CDs can be an excellent investment alternative if you are concerned about investing during market volatility periods.
Just like a traditional savings account at a bank, CDs are Federal Deposit Insurance Corporation (FDIC) insured. If the customer’s bank fails, FDIC insrurance, up to $250,000, with the full faith and credit of the U.S. government may be available. For more information on FDIC Coverage view the complete disclosure.
Please keep in mind that there are non-FDIC insured CDs available, before purchasing a CD make sure you read the account disclosure. At First County Bank, all of our CDs are FDIC insured. Check out our current CD rates here.
Locked In Rates Until Maturity Date
Financial markets can be volatile, with uncertain returns on investments.
However, fixed-rate CDs enable you to lock in fixed interest until maturity. Unlike the stock market’s volatility, a CD increases based on the Annual Percentage Yield (APY) terms.
There are other types of CDs such as variable-rate and adjustable-rate certificates of deposits, but at First County Bank we do not offer these types of CDs.
CD Laddering
A CD ladder is a savings strategy where you invest in several CDs over time with staggered maturity dates. This will help keep some of your funds accessible in the near term while your money is locked into a longer-term CD.
Additionally, it allows for some flexibility in dealing with shifting interest rates. You can roll over your funds into a new CD or withdraw your money. Before considering this strategy, please review terms and conditions carefully.
Flexible Maturity Dates
Are you planning to move into your dream home in a year or two, go on a vacation abroad, or further your education? A certificate of deposit can be an excellent and safe way to invest your money for a defined period, corresponding to your financial goals.
CD periods typically vary from three months to five years, making them helpful in putting money down for future expenditures within the set time frame. Generally, the longer the duration, the greater the CD interest rate. The shorter the time, the more frequently you can withdraw or renew a certificate of deposit.
Remember, if you withdraw money from your CD before the maturity date, you are breaking the terms you agreed to keep your money in the account. By breaking the terms, you will most likely have to pay a fee which is called an early withdrawal penalty.
Different CD Options
There are various accounts available if you are interested in investing in CDs. Some financial institutions or banks have a no-penalty deposit certificate, which is excellent for savers who want to earn a reasonable interest rate. You can also choose to close the account early if necessary.
Other CDs also allow more than a single deposit, so if a typical certificate of deposit isn’t suitable for your present short-term goals, there are a few others you might want to consider.
Is It Worth Opening a Certificate of Deposit Account?
CDs are a great way to save and grow your money. If you do not need your money for an extended period and can commit to keeping your money for the length of the CD term, then you should consider opening up a new CD account.
Before opening an account, it’s important you evaluate your financial situation and potentially seek financial advice from a licensed professional.
Frequently Asked Questions
1. Are Certificates of Deposit (CDs) a safe investment?
Yes, CDs are considered safe investments as they offer fixed interest rates and are FDIC-insured up to $250,000 per depositor, per account ownership category. This protection guarantees your funds even if the bank fails, providing peace of mind for conservative investors.
2. What is CD laddering, and how does it work?
CD laddering is a strategy where you invest in multiple CDs with different maturity dates, allowing you to access some funds periodically while earning higher interest on longer-term CDs. This approach can also help manage interest rate changes over time.
3. Can I withdraw funds from my CD before it matures?
While it is possible to withdraw funds before the maturity date, doing so may result in an early withdrawal penalty. Certain CDs, like no-penalty CDs, allow early withdrawals without fees, though these options typically offer lower interest rates.
