You've probably seen or heard of this product as an advertisement online or at a bank but it's actually not an audio disc that is meant for a CD or DVD player. A Certificate of Deposit is an investment product issued by the bank to a person depositing money for a specific amount of time to earn interest. Basically a safe way to invest your funds.
So, how do I get a CD? The process is like opening a checking or savings account at an FDIC or NCUA insured financial institution (bank or credit union). This is also available to new business owners who wants to obtain a secured business credit card. As of 2021, consumers may find rates 1.00% or less.
Call and shop around for CD rates. Online banks such as Ally bank, Discover bank, and other online banks have the best rates due to no physical banking locations. Still check your common Wells Fargo and Bank of America branches for rates but they may not seem so competitive.
Pick a CD type. Depositors can choose from Traditional CD's for basic, High Yield CD's for a high balance, Business CD's, and an IRA CD.
Decide on a loan term. After you pick your CD type, you'll have to now choose the length of the term. How long you want to keep it in for? Terms varies from 3 months to 60 months or five years. But here's the thing, you cannot withdrawal before the term expires or else a penalty will appear. Depending on the bank, penalty can be a month or more of interest forfeited.
How to get paid. You will receive monthly interest payments but you can choose where you want the funds deposited. You have the option to keep it within the CD and you will receive all of your interest payments for that term. And you can also send the monthly interest payments to another account.
Here's a secret between me and you: Banks make thousands or millions from your initial CD deposit and give you the leftovers.
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