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How Do I Choose The Right CD For Me?

16 August 2012 One Comment

If you are in the process of looking at different CD rates, you may be confused about how to choose a certificate of deposit for your investment purposes. There are so many different banks and some in different CD products out there that it can be difficult to choose one. If so, here are a few tips to keep in mind when choosing a CD.

Length of Term

One of the first things that you should look at when choosing a CD is the length of the term. Every CD has a maturation date associated with it. On the maturation date, you can get the money back out of the CD. If you take the money out of the CD before it matures, you’ll have to pay a penalty. When you are choosing a CD, you should choose one based on the amount of time that you want to invest your money. If you have a longer time frame in mind, you might want to choose a 5 or 10 year CD. If you will need the money quickly, a 6 month CD might work better.

Penalty

During the process of picking a CD, you should also look at the amount of penalty that you’ll have to pay if you take the money out early. Usually, this will end up costing you most or all of the interest that you have accumulated in the CD up until that point. While you never one to take the money out before it matures, you sometimes may be forced to in extreme circumstances.

Callable CDs

When looking at the different CD options from your bank, you should also find out if the CD you are evaluating is callable. If the CD is callable, it loses a lot of its attractiveness. When a CD is callable, it means that the bank can retire it at any point in stop paying you interest. This is often a feature on high interest rate CDs. Most of the time, callable CDs are not very attractive, because they take away your long-term investment stability and good interest rates. The bank often does this when market interest rates lower, so that they can reissue new CDs at lower interest rates.

CD Rates

When you are trying to choose a CD, one of the most important factors for you to look at is the interest rate that it earns. The rate of the CD tells you how much money you will make from your investment over the life of the term. Ultimately, you want to find a CD that has a high rate, so that you can earn more money overall. You can visit Discover Bank for more information if you are interested in finding out about the latest CD rates and what is competitive.

Once you make your decision, put the money into the CD contract and forget about the money. You don’t want to take it out before it matures, so it’s best if you just leave it alone until it matures.

One Comment »

  • Bonprix Gutschein said:

    I recently was in a major us bank and their was a sign on the wall that stated ten year CD 1.01 thats one percent.