Certificates of Deposits Tips That Can Save Your Day
A certificate of deposit is an investment option that is taken by people who are looking for high returns from low risk investments. Certificates of deposits traditionally provide a much higher return than a conventional savings account. the only down side is that you will have to lock up your money for a certain period of time unlike a savings bank account where you can retain your liquidity while reaping the benefits of the interest so accrued. But the issue with savings bank account interest rates is that they will only hedge you against inflation but the interest rate after accounting for inflation will be just over 0.8% which is barely any income at all.
There are some tips that can help you out if you are interested in depositing your cash with a certificate of deposit with a financial institution
Do not fall for an interest rate that is far above the average being offered
Many people do not think about why a certain financial institution might be providing such a high interest rate. Jumping for the first company that promises the moon is a sure fire way of ending up in a financial quagmire. Firstly, it could be a company that is not FDIC insured. If so, your money will always be at risk of failing at the whims of the global financial enterprise. Else, the institution might just be doing a marketing gimmick by claiming to provide such high interest rates.
Confirm the maturity date of your certificate of deposit
This is one of the most basic things that you have to do when you buy a certificate of deposit. If you haven’t done this, it is highly unadvisable for you to handle your own personal finances! A lot of people tend to buy certificates without actually taking in writing when the certificate matures.
Investigate all the terms and conditions particularly for callable CD’s
If you are going in for callable certificates of deposits, be doubly sure about the terms and conditions. A callable CD can be revoked at any time at the discretion of the bank. You need to ensure that there are certain safeguard features which will protect you from the bank holding complete control of the amount.
Confirm the interest rates promised
Take everything in writing from the financial institution. Ensure that you read the fine print to understand just what the bank is promising. There are many cases where the interest assured at the beginning is just not going to hold up in the long run. It might just be an introductory offer which will be revoked in due course of time.
Research penalties thoroughly
There are many penalties and fines that can be imposed upon you if you remove your money prematurely from the certificate. Find out just how much this really is before investing your money. And make sure that you will not need the money pretty soon before you lock it up with the deposit. These are but just a few tips that can help you safeguard your money in the long run.
