Certificates of deposit are a safe option for investing your money. A certificate of deposit or CD can range from $100 to $250,000 or more depending on the issuing banking institution. Most banks require a minimum of $1,000 but can go as low as $100. It is not recommended that you invest over the $250,000 limit because that is also the FDIC’s insurance limit. When you find a CD to invest in, it is always important to make sure the financial institution is FDIC or NCUA insured. This will make sure your principle and interest earned is safe and protected from a failed institution. Usually the longer you invest in any certificate of deposit the higher the rate you will earn. Some banks even offer Jumbo CDs for those who have large amounts of money to invest. These Jumbo CDs also tend to earn a higher rate. The more you deposit the higher the interest rate you will earn.
Other Certificate of Deposit Considerations
- Early Withdrawal Penalties. It’s important to know the policy of an Early Withdrawal Penalty before depositing your money. Some banks have strict penalties for withdrawing your money early, ranging from just a few months interest earned up to the full amount of interest earned. There are some banks that have specific CDs with no Early Withdrawal Penalties. Ally Bank has offered no early withdrawal penalty CDs, but these usually come with a much lower interest rate.
- Interest Rate Bumps. Some financial institutions offer the ability to increase your interest rate once during the term, allowing you the flexibility of earning the highest rates being offered. Ally Bank has offered the ability to increase your interest rate just once during the term if rates increase.
- Term & Conditions. It’s important to read the terms and conditions of your account as some certificate of deposits require you to add additional deposits via direct deposit. Many CDs are set to automatically renew at the end of their term, so if you do not catch the end of your CD, you might lose access to that money again for another term. Worse off, you would have to forfeit interest earned to get the money out.
No matter how much money you have, you can always find a CD that will fit your needs. By investing into a CD you will begin your way to a more stable financial future.