What should I consider if I am interested in making a certificate of deposit?

The first thing that you should ask yourself is the safety of your money being deposited in the bank. It is known that CD or Certificate of Deposits is among the safest investment you can do with your money because they are insured with the FDIC or NCUA. Apart from that, once you established yourself to use the CD Ladder strategy, you can alternate your account’s maturity dates and still has a means of accessing a part of your cash.

However, there are also things to deal with before investing your money in this kind of scheme. The first and foremost is to have a good foresight if you do not need your cash you are locking in the bank from the time you deposited it until its maturity date. The reason for this is that when you advance your money earlier than the maturity date, there is an equivalent penalty involved. This may also affects the reduction in the supposed interest rate of your money. That is why it is important to secure cash for emergency situations and for uncertain days.

In this case, before finally bolting your funds, be sure to ask if there are dues involved and the seriousness of its effect on the interest rates as this is different from the usual account where you can withdraw money on demand. Also include asking how the bank will pay you out of the interest once you open an account with them. It is absolutely free to ask such questions and it is best to know things of your transaction before you will regret later on.

On the other side, the advantage of time deposit is the interest rate it earns for a given time. Since your fund is being kept for a period length of months or years, it is granted higher interest rates than they give to the other accounts as an incentive. Nevertheless, it is advisable to shop for banks or credit unions to compare rates because not all banks offer the same percent of interest rates for such kind of deposit. It is known that smaller banks kick off higher interest rates than bigger ones.

In any case, you have to remember too that the bigger your money is, the higher the percentage rate it earns. Also, the longer you button up your money in the bank, the higher rate it gives you in return.