Everybody says they want to save, but often don’t because they don’t really know where to start! Saving money is a slow and gradual process. It can be done! One of the best ways to start saving is to open up an account called a Certificate of Deposit or CD! CD Accounts are extremely easy and safe investments that most people can get into. They can also have higher yields than most interest bearing accounts on the market!
Editor’s Note: If you’re interested in investing into CD’s, be sure to check out the table below and our list of the Best CD Rates!
Table of Contents
What is a CD?
A CD, short for a Certificate of Deposit, is a savings account that allows account holders to deposit money that can gain interest! Unlike savings accounts, where you insert a certain amount of money and it build interest up until you close it, CD accounts only allow you to put money into the bank once for a certain term time period and take it out whenever the CD’s term expires/matures. Because of the lack of liquidity of a CD compared to a regular savings account, CD accounts usually offer higher CD Rates/APY Rates to CD users.
Should I Open a CD Account?
CD’s are a great way to start investing into the future, but they are not right for everyone. If you need money consistently to pay bills and can’t afford spending a large amount right now, a CD is not right for you. For most CD accounts, you will need thousands of dollars to invest into a CD account. Spending all your money into a CD for a return is risky if you don’t have an emergency fund to pay for anything unaccounted for.
However, if you do have extra money on hands and it is just sitting there, it may be in your best interest to invest into a CD account. Instead of having dormant money that makes 0% interest, put it into a CD account and get CD rates in the range of 2%! Have a trip in the near future and want to set aside money for it? Find out how many more months it will be until your trip and invest into a CD that is within that time frame. After the CD matures, the money set aside for the trip will be more than you planned to have!
Should I Go for a Long or Short CD Term?
Depending on your strategy, you will need a different CD terms to comply with your schedule and earnings. A general rule of thumb for simply investing into CD’s is to pick for long CD terms if interest rates are falling, and short CD terms if interest rates are growing.
Types of CD’s
- Traditional CD: This is your regular CD of deposit money, earn interest, and take out when CD account matures. Be careful to not draw out your money early or you may be subject to early fees!
- Bump-up CD: This CD is if you believe interest rates are going to increase in the future. Purchase a Bump-up CD and allow it to takes its normal course. When interest rates start approaching a max, bump up your CD to the current and higher interest and stick with a higher interest! Not many banks offer this option, but it is another way to get even higher interest rates!
- Callable CD: Callable CD accounts are probably the most risky as the Bank can call you and cancel your CD account paying for your principal and whatever interest you built up during the early term.
- Liquid CD: This CD is like a savings account because it is easier to take out your money. Beware, however, these Liquid CD’s typically have lower interest rates meaning lower returns!
- Brokered CD: Any CD offered by a broker. Brokered CD’s gives you offers to many banks and doesn’t limit you to a single bank’s CD rates. They give you the option of shopping for CD’s through third party markets giving you the opportunity to buy many different CD’s.
CD Investment Strategies
- Laddering: This strategy involved splitting up your investment money into different CD’s and purchasing CD rates that mature at different times. This way, a CD will always be ready to mature and will give you a return all the time!
- Bullet: This technique involves a large amount of start money. It is super easy and is a good way to save for a certain amount of time. How it works is that you buy a large number of CD’s that all mature at the same time, and then withdrawing all your CD’s at the end of maturity. You will get good returns from each of the CD’s you bought, while waiting the same amount of time.
- Barbell: This strategy works by just buying CD’s that are either long or short term. If you can’t find decent medium length terms, this barbell strategy is for you.
|-Available online nationwide
-Earn 0.72% APY up to 2.50% APY on a 6-Month up to 5-Year Term CD
-$1,000 minimum to open
-Selection of terms to meet your needs
-A range of choices. Low minimum deposits.
-No fees to open or maintain the account
-Earn 6X the national average
-Available as Custodial
-Open a CIT Bank Certificate of Deposit Account today!
If you want to start saving and being responsible for your finances, it is a great idea to open up a savings or money market account. After you open one of those, another great way to start saving even more is to open up CD Accounts. CD rates are typically higher than regular APY rates of savings accounts meaning you get a higher return! They are safe and pretty easy to understand. Before you start going crazy with CD rates, look into different strategies like CD laddering and strive to maximize your profits from CD’s! If you’re convinced you need a CD account, be sure to view our list of the Best CD Rates!