Certificate of Deposit

June 26, 2013

Have you ever thought of buying a certificate of deposit, or CD from your bank? CD's are low risk, but also low return investments. You are lending the bank a certain amount of money for a specific period of time, and they provide you a certain percentage return. There are pros and cons for investing in CD's. CD's are not savings accounts. Some advantages are that they are low "market risk," your money is insured and the rate of return is fixed. The FDIC protects your money up to $250,000; per depositor, per insured bank, for each account. Having a fixed rate of return can be an advantage because you know exactly what return you will receive. The rate might be very low, but you at least know what you will get in the future. A disadvantage is that your money can be held up in the CD for a long period of time depending on the length of term you own. So make sure you look at both the pros and cons for using CD's.

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