A CD account (Certificates of Deposit) is a great way to build up and save money. It can help you invest in your future, practice good saving habits, and possibly earn you great APY Rates. Depending on the economic and financial situation the person is in, could make a CD Account worthwhile. Read below for more information on what a CD account is and if you should invest in one.
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CD Accounts & Investing
This type of bank account will enable you to save money for a certain amount of time. This time period is referred to as a “Term.” Many accounts will offer terms ranging from 6 Months to 5 years at a time. Normally, a CD account has a fixed savings interest rate that will remain constant. It has low-risk investment factors that don’t take you off guard. Know the amount of money you earn when your term is over, and how beneficial the features are for you.
Looking over what your economic and personal financial standing will play a big part of opening a CD account. This will help you see if a Certificates of Deposit account will be worth the effort. Many banks will offer higher rates for their CD account compared to a savings account.
Before Investing into a CD Account
There are many factors you must be aware of before committing to opening an account. For people that live paycheck after paycheck, this might not be the best idea to invest into. These accounts require you to put your money away, and if you withdraw before the term is over it can come with penalties.
These types of accounts are more beneficial for people that have an excessive amount of savings and want a low-risk account. Since they’ve been around for many years, lots of people wonder if it helps move them forward. The financial climate has been overtaken by what happened after the Great Recession. In other words, it caused CD rates to fall behind to their lowest point ever recorded.
Is It Possible to Lose Money in a CD Account?
Yes, you can lose money in a CD account. However, this happens from your own actions in managing your account. Unlike stocks, CDs will guarantee a specific amount you can gain by the end of the term period. Just as long as you leave your money in that account for the whole term.
Many CD accounts are insured by the FDIC (Federal Deposit Insurance Corp). They will insure that your account will be protected even when the bank fails. Your money won’t be lost if anything bad happens to the financial institute you’re with.
Depending on the term of the CD account you sign up with, will determine when the interest is paid. This interest will be paid in full by the end of the CD term. Keep an eye out for terms that match your financial position.
Building Credit & Your Financial Future
Remember, it’s always good to be aware of your credit rating in anything financial related. With CDs, they won’t affect your credit directly. However, there are a good amount of people that take advantage of it to increase their ratings. This can be done by taking out a secured loan against the CD account you have. Just as long as you pay your loan back, your credit score will grow. But, when you invest into a CD account by itself, there’s no effect that’s done to your credit.
Once you understand how a CD account works and what they have to offer, it all comes down to if it’s worth the time or not. If your main objective is to increase your savings while still being able to manage emergencies, CDs are worth it. It will make calculating finances much easier since the rate is consistent. Plus, if you want a risk-free investment you can rely on, its a great account to open.
Compare CD Accounts
 • Get started and open a Discover® CD in 3 easy steps. • Available nationwide online • Discover offers CDs with some of the highest and most competitive rates! • Select terms as short as 3 months up to 120 months • Rates ranging from 2.00% APY up to 4.00% APY. • Opening a Discover Bank Certificate of Deposit is extremely quick and easy. • Funds on deposit are FDIC-insured up to the maximum allowed by law. |
Conclusion
Now, you know what a CD account has to offer and the pros and cons of opening an account. These types of accounts are great for people that have lots of money in their savings account and want a low-risk account.
Plus, they come with their own rates depending on the term you sign up with. However, if you’re not good at managing your money, then this account is not the best option for you.
Overall, it’s your decision to see whether or not it’s worthwhile opening a CD account.
