Everything You Need to Know About Certificate of Deposit Accounts

A traditional CD is one of the most popular forms of saving and investment. Unlike other types of CDs, which offer more versatility in the way you can access your funds, a traditional CD locks your money away for a fixed period of time. This gives you an opportunity to earn interest on your investment without having to worry about withdrawing your funds early. Additionally, many traditional CDs come with guaranteed returns, making them an attractive choice for investors who are looking for a low-risk savings vehicle.

A high-yield CD, or certificate of deposit, is a type of investment that offers a higher rate of return than traditional CDs. This is achieved by tying up a larger amount of money for a longer period of time, typically 5-10 years. High-yield CDs often have minimum deposit requirements and can be subject to penalties for early withdrawal.

A jumbo CD, is a type of investment that offers higher interest rates than traditional CDs. While the structure and terms of jumbo CDs are similar to those of regular CDs, their larger size allows them to earn higher returns.

For example, while the typical minimum deposit for a regular certificate of deposit may be only $1,000, a jumbo certificate may require an initial investment of $100,000 or more. Additionally, the length and frequency of compounding interest may depend on the size and type of account.

Overall, jumbo CDs offer investors with larger sums of money an opportunity to grow their savings in a safe and low-risk way. Whether you want to invest for retirement or for another financial goal, choosing a jumbo certificate of deposit can help you reach your goals faster.

The name "no- penalty" should give it away. This certificate of deposit is designed to offer more flexibility than conventional CDs. Unlike a traditional CD, which penalizes you for early withdrawal, a no-penalty CD allows you to withdraw your funds at any time without being charged any fees or losing any interest. As a result, this type of CD can be ideal for anyone looking for short-term savings options or who may need access to their funds for unexpected expenses.

An IRA CD, or individual retirement account certificate of deposit, is a type of investment account held in a tax-advantaged individual retirement account. These accounts can be attractive to risk-averse investors who are looking for a safe and secure way to build their retirement savings. Unlike other types of investments that may offer higher returns but also involve some degree of risk, CDs offer a guaranteed return on your money with no chance of losing your principal investment. However, this protection does come at the cost of potentially lower returns than you might get with other types of investments. 

A bump-up CD, also known as a rising rate CD, is a type of Certificate of Deposit that allows investors to take advantage of fluctuations in interest rates. Unlike traditional CDs, which typically have fixed interest rates that are set at the time of purchase, bump-up CDs allow savers to "bump up" their rates to a higher level if market rates go up.

This means that savers can benefit from increasing interest rates and earn more on their investment over time. Of course, there are some downsides to a bump-up CD as well; for example, these types of CDs often come with lower initial interest rates and may require a longer investment term than a standard CD.

A brokered CD is a special type of CD that you can only purchase through a brokerage firm instead of directly through a bank. Unlike regular CDs, which are almost always insured by FDIC or NCUA financial institutions, not all brokerages offer FDIC or NCUA-insured brokered CDs. So, before investing in a brokered CD, you must read the fine print and understand all the terms and conditions. Also, be on the lookout for any features like early withdrawal penalties or policies that make the CD callable.

• CDs are safe when purchased through a NCUA or FDIC insured credit union or bank. 
• CDs offer a higher interest rate than regular savings accounts. This means that your money will grow faster in a CD than it would just sitting in a savings account. And since CDs typically have longer terms than savings accounts, you can end up earning a lot more money in interest over time.
• No monthly maintenance fees.  Some financial institutions charge fees for having a savings or money market account. You wouldn't have to worry about that with a CD. Woo-hoo, you get to keep to interest you earn (all of it). Just don't withdraw your funds before it matures.  
• Guaranteed returns: When you  invest your money for a predetermined period of time, you'll earn interest on the money that you have deposited, ensuring a predictable return on your initial investment.
  For example, say you open a five-year (60-month) Regular CD with $6,000 and earn a 4.00% APY. At the end of your CD term, you’d have $7,300 and change. If you’re saving for a long-term goal that has a specific end date, you can tailor your choice of CD terms and interest rates to help you meet your goal.

Here's a CD calculator so you can see how much your CD could be worth.

• Higher rates than a savings account. This is because CDs are longer-term investment products, which means that the bank can offer higher rates in exchange for tying up your money for a certain period of time.  
  
  
  

• Have to wait to use to access funds.  With CDs the requirement for many institutions is that you have to wait until your funds mature before you can access it. 
• Your money will be inaccessible for a certain period of time. Meaning that you won't be able to access it in the event of an emergency. 
  Also, many people find that having their savings held up over long periods of time can be limiting and make it more difficult to achieve their financial goals. 
• Interest rate may not grow. There's always the risk that your rates are low  and there won't be a great return of funds.