CD Secrets

Understanding a Certificate of Deposit

The secret to a CD is that it pays higher yields than liquid savings accounts. Sounds good, right? It is, as long as you understand that a CD "locks" up those funds for a specific period of time. Have no fear, both online banking and "conventional" institutions guarantee the interest rate on your certificate of deposit for the term chosen. When you choose a CD, your longer-term investment is FDIC insured, and provides higher yields than liquid savings accounts. So if you can afford to invest for a period of time from a few months to a number of years, purchasing a CD is a sound investment vehicle.

CD Investing Strategies

You can have as many CD's as you like and thanks to CDARS® the FDIC will insure your CD investments up to $50 million. Many savvy investors have come up with specific CD investing strategies designed to help them take advantage of higher interest rates.

The general rule is that the larger the amount of the CD investment and the longer the period of time you choose to invest, the larger the return on your investment. Since interest rates rise and fall, the best strategy, if you are purchasing more than one CD, is to buy them for different periods of time so that you are not locked in to any one specific interest rate.

Traditional Certificates of Deposit

A traditional CD is the deposit of a fixed amount of money for a specific period of time at a predetermined interest rate. When the CD comes due you have the option of cashing out or rolling your CD over for another term. You can take the interest earned out and reinvest the original amount, or purchase a new CD at its new value. There are penalties for withdrawing your CD early and they can be quite stiff, so be sure that when you purchase a CD you will not need the funds for a set period of time. If you want you can find out more information on How CDs Work here.

Purchasing CDs from an Internet banking source is just as safe as purchasing them from a "free-standing" bank branch. What's most important to remember is that you are locking your investment in at a pre-determined interest rate so you want to shop for the best CD rates available. A great place to start is at iGObanking.com.

It's easy to sign up for online banking. Go to iGObanking.com, member FDIC, to begin your Internet banking today or call us at 1-888-432-5890.