Published on October 29, 2009.
Certificates of Deposits (CDs) can be defined as savings accounts in that they are insured by the FDIC for banks or by the NCUA for credit unions. Thus, they are virtually risk-free. The difference between CDs and conventional saving accounts is that CD has a specific, fixed term (often three months, six months, or one to five years), and usually a fixed interest rate. Investors cannot withdraw the money in the certain period. Once the CD reaches its maturity, the money can be withdrawn together with the accrued interest. Early withdrawal of amount before maturity date will penalize the investor.
CDs bear fixed cd rates. The higher a CD’s maturity periods is, the higher it’s cd rate. The factors that determine CD rates are the length of the maturity period and the current interest rate environment. If you are planning to be an investor, you should do your research to find the best cd rates. compare cd rates among different banks and different types of CDs themselves. Find the bank, institution or credit union that has a good reputation, and make sure they are insured by FDIC or NCUA. You can check out the cd rates online or locally, but generally an online bank will usually give you a better CD rate than a local bank.