Certificate of deposit rates are saving certificates issued by banks and credit unions to consumers who keep their savings with these institutions for a fixed period of time to obtain interest on their funds. The rate of interest varies with the bank and the duration of the deposit. It is good to know the benefits and limitations of making such deposits.
1. Risk-free Investment: CD’s make the safest investment. Deposits up to $250,000 are insured by FDIC.
2.Fixed Rate of Interest: Irrespective of the changes in money market, the interest rate of CD’s remains unaffected. This kind of assured return is certainly more comforting when the shape of economy doesn’t look very good.
3. Large variety of CDs: You can find any number of banks/credit unions offering variety of deposits with varying maturity periods and interest rates. You can choose from among traditional, liquid, bump-up, zero-coupon, brokerage, market-linked, callable, etc. You can also choose to have CDs with fixed or variable rate of interest and for short or long periods.
4. No Charges/fees: You need not to pay any fee to a broker or middleman. You can straightway approach any bank and have it made in your favour.
5. Low Minimum Requirement: You can invest as small an amount as $500. You may transfer funds from your savings account to a CD.
6. Easy Reinvestment: You can instruct your bank to credit the amount of principal plus interest to your account and roll over your savings to an alternate form of investment or continue to have CDs.