Certificate of Deposit (CD)

Certificates of Deposits, or CD's, are a great way of earning a high return on your investment. They are very easy to set up, and can be tailored to the investor's needs. Furthermore, almost all banks and financial institutions issue CD's. CD's have some great benefits when it comes to investing, but like most investments, it also has its downsides.

A CD is a certificate issued by a bank or credit union that states that an investment has been made. CD's are issued for a specified time period, usually for 3 month intervals greater than 6 months. They can also be issued for time periods of one to several years. Cd's are generally insured by the FDIC and the particular bank's policies on insurance. The rate at which CD's draw interest is determined when the CD is issued. Usually, the longer the period of investment, the higher the rate of interest. This rate is a fixed rate that is usually compounded annually.

One of the downsides of a CD is that it restricts the investor from withdrawing from the account. Although it is possible to withdraw the money, it often incurs a large penalty. This is due to the interest rate on the CD being larger than most types of savings accounts. The issuing financial institution uses the investment to loan money to other customers. The loan has a higher interest rate than the CD, which allows the institution to still make money while offering the investor a higher interest rate than savings accounts.

CD's are not just a one time investment though. An Add-On Certificate of Deposit can be purchased instead of a normal Certificate of Deposit. These Add-On CD's allow the investor to continue to add money to the CD, without incurring any penalties and also preserving the interest rate. Add-On or Add-In CD's are a great investment if interest rates look like they will drop. It is a way that the investor can guarantee a higher rate that will be maintained for a certain period of time, perhaps long enough for interest rates to rise again. Most financial institutions that allow this type of CD require that the additional investment meet a minimum dollar amount, generally over $500.

CD's are referred to by three names, small, large, and jumbo. Typically, CD's under $100,000 are considered small, while those above $100,000 are considered large and jumbo. Almost all large and jumbo CD's, as well as some small CD's, are negotiable with financial institutions.




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				*Certificate of Deposit (CD)* Certificates of Deposits, or CD's, are a great way of earning a high return on your investment. They are very easy to set up, and can be tailored to the investor's needs. Furthermore, almost all banks and financial institutions issue CD's. CD's have some great benefits when it comes to investing, but like most investments, it also has its downsides. A CD is a certificate issued by a bank or credit union that states that an investment has been made. CD's are issued for a specified time period, usually for 3 month intervals greater than 6 months. They can also be issued for time periods of one to several years. Cd's are generally insured by the FDIC and the particular bank's policies on insurance. The rate at which CD's draw interest is determined when the CD is issued. Usually, the longer the period of investment, the higher the rate of interest. This rate is a fixed rate that is usually compounded annually. One of the downsides of a CD is that it restricts the investor from withdrawing from the account. Although it is possible to withdraw the money, it often incurs a large penalty. This is due to the interest rate on the CD being larger than most types of savings accounts. The issuing financial institution uses the investment to loan money to other customers. The loan has a higher interest rate than the CD, which allows the institution to still make money while offering the investor a higher interest rate than savings accounts. CD's are not just a one time investment though. An Add-On Certificate of Deposit can be purchased instead of a normal Certificate of Deposit. These Add-On CD's allow the investor to continue to add money to the CD, without incurring any penalties and also preserving the interest rate. Add-On or Add-In CD's are a great investment if interest rates look like they will drop. It is a way that the investor can guarantee a higher rate that will be maintained for a certain period of time, perhaps long enough for interest rates to rise again. Most financial institutions that allow this type of CD require that the additional investment meet a minimum dollar amount, generally over $500. CD's are referred to by three names, small, large, and jumbo. Typically, CD's under $100,000 are considered small, while those above $100,000 are considered large and jumbo. Almost all large and jumbo CD's, as well as some small CD's, are negotiable with financial institutions.
*Current Rates*

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Certificate of Deposit (CD)

Current Rates