Certificate of deposit best for calculated risk takers

There are a lot of us who would like to earn more returns on the money we have on hand but do not want to take uncalled risks that end up with losing all the spare cash. The certificate of deposit is the perfect option for people who want to take calculated risks, but still ensure they make money on their deposits. Since most of the deposits are insured by the FDIC, you can be sure that your money will be safe and sound while also earning extra dollars. This is a better option as compared to savings account or checking accounts since the interest rates on CDs are relatively higher.

As per the Federal Reserve, the certificate of deposit can be termed as time deposit since this is the money you will be investing in the bank for a short limited amount of time. When you deposit the money with the bank, it is assumed that the money will not be withdrawn till the term matures. Since the banks are sure that you will not remove the money till the term matures, they are willing to pay a higher interest rate, unlike in the case of checking or savings account. On the contrary, if you decide to withdraw funds before the maturity date, you will have to end up paying a hefty fine to the financial institution where you have invested the money.

According to the regulations stipulated by the Federal Reserve, if you withdraw the deposited money within just six days of investing it, you will have to lose interest for that period of time. However, many financial institutions offer a grace period within which you can withdraw the amount without any penalties. However, if you do not do so and withdraw post the grace period, the penalty levied will be quite high.

For the first timers, it is important to know that there are certificate of deposits of varying tenures that you can opt for. There are CDs that range from a few months to a few years that you can choose from based on your convenience. The rate of amount paid out as interest will not only depend on the duration of the CD, but also the amount invested with the bank. Various financial institutions have various rates for CDs. It is always recommended that you take a look at the options offered by many financial institutions in your region before making your choice.