Tips on Evaluating CD Rates

Certificate of Deposits are similar to saving accounts. When it comes to saving a particular amount of money for sometime later in the future; for retirement, child college tuition obligations, etc; one needs to carefully evaluate the entire procedure to avoid losses over the passage of time.

Investments should be stored in measurements that are predictable, especially the CD’s that are aimed to be utilized after a particular time period. Here are three tips that you can use to evaluate CD’s as an investment in your portfolio.

Tip 1: Is the CD Safe?

Certificates of deposits are considered to be amongst the safest investments, according to analysts. They basically guarantee a return on investment after a particular passage of time along with the added amount of interest. The investments that come under CD include U.S notes, bills, bond, T-bills, large scale insurance company policies and commercial paper from major US corporations. Investors can purchase CD’s with ease from any major US bank without being apprehensive about the safety of the investment.

According to Federal Deposit Insurance Corporation, all the CD’s issued by banks will have guaranteed insurance. Insurance can be up to $250,000 per investment and if more than one member of a family, such as both the spouses; invests in their name, the guarantee level from a specific bank will increase.

Tip 2: Is the Bank Safe?

With the rise of solvency in banks being apparent in the market, it sometimes becomes hard for investors to decide which particular bank will be a safe investment for CD’s. Generally, banks that are the smallest are more prone to face solvency issues. However, to be on the safe side, it is a wise decision to see if the bank you are considering is covered by the Federal Deposit Insurance Corporation. An entire list of banks covered by FDIC is listed on their website, so make sure that you do check with the list before finalizing the investment.

Tip 3: Is the Interest on Income Important?

CD’s are a representation of the most secure part of your investment. When it comes to interest on income, it is important to be careful about rates that are “too high” as this is a warning flag indicating that the CD may not be safe. In order to avoid the risk, simply be aware of high returns and avoid those investments.

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