Three Smart Reasons to Invest in CDs

Certificates of deposit (CDs) are one of the most popular bank products available to help you save money toward any financial goal – large or small.  Because CDs pay some of the most competitive interest rates of all banking products, it’s no surprise that people choose to invest in them.  Not only do they make saving much more rewarding, but they also have some other little-known benefits you may not have been aware of.

Reason #1:  CDs Can Help You Earn More While Still Having Access to Your Money

One of the biggest complaints people have with CDs is that your money is essentially “tied up” in the bank for a set period of time.  But that’s not the whole picture, particularly if you choose to ladder your CDs.  Rather than putting a large deposit into one CD and leaving it locked there for a considerable amount of time, many investors break up the deposit into smaller amounts – each with a different maturity date.

This way, the money becomes available at different intervals so that you can withdraw it during that time if you need to.  “Laddering” your CDs in this way means you’ll need to act quickly if you want to access your cash though – you only have a 7-15 day “decision period” (depending on the Terms & Conditions set forth by the bank) until the CD rolls over into its same term  length at the prevailing rate.  Still, for many people, having this kind of structure brings added peace of mind and confidence because they can still get to their money within a reasonable timeframe.

Reason #2: Bank Issued CDs Pay Competitive Rates

Using the Internet is one of the best ways to compare CD rates, but you may be tempted by a rate advertised in your local paper.  Be careful as not everything is as it seems.  Sometimes consumers have been lured into a faulty product or a more questionable investment because of supposed advertised CD rates that weren’t entirely true.  Banks will gladly answer your questions about CDs, what kind of interest you can earn, what the maturity date is, and so forth.  Your best bet is to stay with trusted websites online, such as Bankrate, and use those as the best ways to compare CD rates rather than chasing after classified ads in the paper.

Reason #3: Bank Issued CDs are FDIC Insured

Many people fall victim to the aforementioned CD offers promoted in the newspaper or through brokerage houses in the hopes that they’ll get a higher rate than what the bank offers.  It’s important to note, however, that only bank issued CDs are FDIC insured.  This means, even in the highly unlikely event that the bank itself becomes insolvent, your money is still secure and safe.  What would happen tomorrow if the brokerage house paying you that supposedly incredible rate simply closed its doors?  Your investment would vanish.  With FDIC insured bank CDs, you’re protected up to $250,000 per depositor.

With so many reasons to consider investing in CDs, it’s no surprise that they’re so popular.  You won’t be leaving your money to the ups and downs of the stock market.  CDs are a reputable, reliable product that continue to stand the test of time while helping everyday people grow their savings in a low-risk, federally insured environment.  To get started with a CD,  compare CD rates online, and then find the one that best fits your needs.  You can even start the application process online and you don’t need an account with the bank to buy a CD.  It’s that simple!

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