Advantages of Certificate of Deposit

2 min read
Mar 1, 2024 9:45:00 AM

A certificate of deposit (CD) is a great way to get a guaranteed return on an investment over a specific amount of time. With a fixed interest rate and term, the investor knows what the CD will earn and when those earnings will be available. 

Here are some advantages of a Certificate of Deposit.

What is a certificate of deposit (CD)?

A certificate of deposit is a type savings account offered by banks and credit unions. Generally, those using a CD agree to keep their money in the CD without taking a withdrawal for a specified length of time. Typically, early withdrawals are met with a fee.

Advantages of Using a Certificate of Deposit

Utilizing a certificate of deposit (CD) can help guarantee a return on an investment, in addition to guaranteeing that the return is met within a specific period of time. And because the CD has a fixed interest rate and term, the investor knows what the CD will earn, and when.  Important to note, however, is that the CD must reach maturity before it can be withdrawn with earned interest. 

Why Certificate of Deposits are Preferred

Many people prefer this savings option for various reasons. For these reasons and more, a certificate of deposit is a popular choice for people who want to save money for the future.

Minimal Risk

Since it is not subject to variable interest rates and the unpredictable stock market like some saving accounts, there is no risk of losing money. The investor knows how much they will earn and the exact time it takes to earn it.

Spend More Time Planning Future Investments

Without the worry of how much money will be available when you need it, an investor can spend time exploring future investments or figuring out how they are going to use the money when the CD finally matures.

Some people take the money and invest it in another certificate of deposit or spend it on something special.

Get Started with a Certificate of Deposit

So, if you’re not a risk-taker and in a hurry, visit your local bank or credit union to ask about investing in a certificate of deposit.

You will need to determine how much money you have available to put away for something special that you and your family will enjoy. It can be a small investment for a future vacation or a substantial one for a new home.

To learn more about setting up a CD, or utilizing a payroll software that can support such a type of savings account, contact us today.

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