Certificates of Deposit
Investors searching for relatively low-risk investments often turn to Certificates of Deposit (CDs). A CD is a special type of deposit account that typically offers a higher rate of interest than a regular savings account. Unlike other investments, CDs feature:
- Federal deposit insurance up to $250,000
- A guaranteed rate for the term of your CD
- Automatically renew at maturity
- Various terms
How Does a CD Work?
When you purchase a CD, you invest a fixed sum of money for a fixed period of time - six months, one year, five years, or more - and, in exchange, the bank pays you interest, typically at regular intervals. When your CD matures, you can either reinvest your earnings or receive the money you originally invested plus any accrued interest as income. But if you redeem your CD before it matures, you may have to pay an "early withdrawal" penalty or forfeit a portion of the interest you earned.
The Certificate of Deposit Account Registry Service® (CDARS®) is the easiest, most convenient way to enjoy access to FDIC coverage on deposit amounts larger than $250,000. Learn more...
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