What is a CD? What benefits are their to having one?
Answers:
A CD, in financial terms, is a certificate of deposit. You deposit money at a bank for a predetermined amount of time and the bank pays you a set interest rate for this period of time. The benefit is that you get a guaranteed amount of interest and your money is safe. The disadvantage is that you will not have access to the money during the term (unless the bank allows you to break the CD early at a penalty) and the interest will not be as high as you could earn in a more risky investment like the stock market.
Certificate of deposit
They pay more then a savings account because you cannot touch the money for the term of the Certificate.
I.E. a local bank might offer 3% on a savings account but 5.25% on a 1-year CD because they get to use the money for a year rather then you coming in and taking it out whenever you want.
Certificate of deposit. Which means you give them your money and they pay you interest on that money for a predetermined period of time.
You buy a $100 6-month cd at 5% interest. After 6 months you get back $105.
The downside is you can't use that money until the time frame is up. You can get in an emergency but you will lose almost all your interest.
It is a certificate of deposit. They are basically savings accounts with a single deposit for a specific term. You are guaranteed the interest for that time and there is a penalty if you take the money out early. It pays much more than a passbook savings account but the money is tied up. You can get rates from 4-6 percent.
Any investment that pays more requires a higher risk. CDs have no risk.
A Certificate of Deposit is an FDIC insured investment whereby the interest rate is guaranteed for a fixed period of time.
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Its like Fixed deposit ,once u deposit say for 3 years , u will get a higher interest compared to savings account.
Because ,once u deposit in CD,u cant withdraw until the expiry
of the period.
In case,in emergency u want to withdraw the amount the bank will not give u any interest on the amount deposited.
Whereas, in savings account ,u will get some interest on the deposited amount.
Currently, CDs are not a very good investment choice. The average return of a one-year CD is currently 4.84% (though there are 2 banks offering 1 yr CDs as high as 5.4%--minimum deposit is $1000) according to bankrate.com.
But you can get a higher rate of return in a money market fund or high yield savings account--without having to tie up your money and generally without a minimum deposit requirement. Emigrantdirect, for example is offering over 5% on its savings account--no minimums, no fees, and you can add or take out money anytime. Many other companies (ING direct for one) offer the same.
If you do have $1000 or more to invest, money market funds offer even higher interest rates--still without having to tie up your money for a year or more. I use Vanguard Prime money market fund, and their rate is around 5.22% right now. Minimum deposit is $3000 though (although I think the minimum is $1000 if you set up automatic investment to happen each month).
A certificate of deposit or CD is a time deposit, a financial product commonly offered to consumers by banks, thrift institutions, and credit unions.
Essentially, you purchase a CD from a financial institution for a specified period of time at a specified interest rate. This CD is FDIC insured meaning that you are GURANTEED to get your money back.
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