WHAT IS A CERTIFICATE OF DEPOSIT (CD).

WHAT IS A CERTIFICATE OF DEPOSIT (CD). A certificate of deposit (CD) is a product offered by banks and credit unions that provides an interest rate premium in exchange for the customer agreeing to leave a lump-sum deposit untouched for a predetermined period of time. A certificate of deposit is a time deposit, a financial product commonly sold by banks, thrift institutions, and credit unions. CDs differ from savings accounts in that the CD has a specific, fixed term and usually, a fixed interest rate. https://en.wikipedia.org/wiki/Certificate_of_deposit A CD, or certificate of deposit, is a type of savings account with a fixed interest rate that's usually higher than a regular savings account, a fixed term length and a fixed date of withdrawal, known as the maturity date. ... CDs typically don't have monthly fees, but most have an early withdrawal penalty. A certificate of deposit (CD) is a product offered by banks and credit unions that provides an interest rate premium in exchange for the customer agreeing to leave a lump-sum deposit untouched for a predetermined period of time. https://www.investopedia.com/terms/c/certificateofdeposit.asp#:~:text=A%20certificate%20of%20deposit%20(CD)%20is%20a%20product%20offered%20by,a%20predetermined%20period%20of%20time. KEY TAKEAWAYS * Top-paying certificates of deposit pay higher interest rates than the best savings and money market accounts in exchange for leaving the funds on deposit for a fixed period of time. * CDs are a safer and more conservative investment than stocks and bonds, offering lower opportunity for growth, but with a non-volatile, guaranteed rate of return. * Virtually every bank, credit union, and brokerage firm offers a menu of CD options. * The top nationally available CD rates are typically three to five times higher than the industry average for every term, so shopping around delivers significant gains. * Although you lock into a term of duration when you open a CD, there are options for exiting early should you encounter an emergency or change of plans. Understanding Certificates of Deposit (CDs). A certificate of deposit (CD) is a savings account that holds a fixed amount of money for a fixed period of time, such as six months, one year, or five years, and in exchange, the issuing bank pays interest. When you cash in or redeem your CD, you receive the money you originally invested plus any interest. Opening a CD is very similar to opening any standard bank deposit account. The difference is what you’re agreeing to when you sign on the dotted line (even if that signature is now digital). After you’ve shopped around and identified which CD(s) you’ll open, completing the process will lock you into four things. 1. The interest rate: Locked rates are a positive thing because they provide a clear and predictable return on your deposit over a specific time period. The bank cannot later change the rate and therefore reduce your earnings. On the flip side, a fixed return may hurt you if rates later rise substantially and you’ve lost your opportunity to take advantage of higher-paying CDs. 2. The term: This is the length of time you agree to leave your funds deposited to avoid any penalty (e.g., six-month CD, one-year CD, 18-month CD, etc.) The term ends on the “maturity date,” when your CD has fully matured and you can withdraw your funds penalty-free. 3. The principal: With the exception of some specialty CDs, this is the amount you agree to deposit when you open the CD. 4. The institution: The bank or credit union where you open your CD will determine aspects of the agreement, such as early withdrawal penalties (EWPs) and whether your CD will be automatically reinvested if you don’t provide other instructions at the time of maturity. Important: When considering opening a CD or how long a term to choose, pay attention to the Fed’s rate-setting movements and plans. Opening a long-term CD right before a Fed rate hike can hurt your future earnings, while expectations of decreasing rates can signal a good time to lock in a long-term rate. How do CDs certificates of deposit work? A certificate of deposit, more commonly known as a CD, is a special type of savings account. You deposit your money into the account and agree not to make any withdrawals for a certain period of time. At the end of that time, you get your money plus whatever was earned in interest back. A certificate of deposit is a simple and popular savings vehicle offered by banks and credit unions. When a depositor purchases a certificate of deposit, they agree to leave a certain amount of money on deposit at the bank for a certain period of time, such as one year. In exchange, the bank agrees to pay them a predetermined interest rate and guarantees the repayment of their principal at the end of the term. For example, investing $5,000 in a one-year 5% certificate would mean receiving $50 in interest over the course of one year, plus the $5,000 you initially invested. Types of certificate of deposit (CDs). 12 types of CD accounts. 1. Traditional CD 2. Bump-up CD 3. Step-up CD 4. Liquid (or no-penalty) CD 5. Zero-coupon CD 6. Callable CD 7. Brokered CD 8. High-yield CD 9. Jumbo CD 10. IRA CD 11. Add-on CD 12. Foreign currency CD Why Would I Open a CD? Unlike most other investments, certificates of deposit offer fixed, safe—and generally federally insured—interest rates that can often be higher than the rates paid by many bank accounts. And CD rates are generally higher if you’re willing to sock your money away for longer periods. A benefit of a certificate of deposit is that it can lay many of those fears to rest. That's because the FDIC insures CDs up to the maximum allowed by law. Before you open a certificate of deposit, confirm that your financial institution is FDIC insured so if it were to fail, you know your money is protected. CDs vs. a Savings or Money Market Account. Savings accounts, money market accounts and CDs typically differ in terms of their interest rates, restrictions, benefits, fees and level of risk. Furthermore, a savings account or money market account may make sense for short-term savings, while a CD is better suited for longer-term savings needs. A certificate of deposit generally keeps your money under lock and key for a fixed term and rate and you can’t make additional contributions. In exchange for losing access, CDs tend to have higher rates than other savings accounts. A regular savings account is more flexible and lets you deposit funds at any time and withdraw money at least several times per month. How Are CD Rates Determined? CD interest rates are typically determined by three factors: 1. The length of time until your CD matures (typically, anywhere from 3 months to 10 years). 2. The current interest rate environment (e.g., how much other banks are willing to pay on deposits). 3. The expected rate of return (how much your bank anticipates it can earn with the money you have deposited. Are Certificate of deposit CDs Safe? Unlike most other investments, certificates of deposit offer fixed, safe—and generally federally insured—interest rates that can often be higher than the rates paid by many bank accounts. How are CDs safe? They’re protected by deposit insurance. If you deposit funds in a CD at a bank, the Federal Deposit Insurance Corporation (FDIC) keeps that money safe. And if you open a CD at a credit union, the National Credit Union Administration (NCUA) offers the same type of coverage. When to get a CD. A CD is a low-risk bank deposit account that feature fixed interest rates which increase with the term of the CD. If you are looking for dependable return on your money, but don't need to tap into your money for a length of time, a CD may be a good savings option CDs work best for people in specific situations, such as: Locking up funds for a future purchase: If you have some savings dedicated to a big purchase years away, such as a car or down payment for a home, a CD can keep your money safe and out of reach until the estimated date you’ll need it. Protecting wealth for several years: If you want to avoid the risks that come with stocks and bonds, especially if you’re close to retirement, you may decide to make use of long-term CDs. Your money won’t grow as much over time as it would in stocks, but CD returns are guaranteed and generally higher than those of other bank accounts. Using CDs for pre-invested funds: If you’re a fan of gradually investing money and you’re sitting on a large sum of cash, you might decide to spread out when you buy stocks or mutual funds using a strategy known as dollar-cost averaging. You can put the cash you’ll eventually invest into CDs to earn more interest than would be possible if it were sitting in a regular savings account. What Is a CD Ladder? A CD ladder is a savings strategy where you invest in several CDs with staggered maturities to take advantage of higher rates on longer-term CDs, while still keeping some of your funds accessible in the near term. In other words A CD ladder is a savings strategy to spread cash equally across multiple certificates of deposit to take advantage of higher rates — usually in long-term CDs — while freeing up portions of that money at short-term intervals. CDs tend to have the highest interest rates among savings accounts at the cost of losing access to funds for periods of time. A CD ladder provides an effective alternative to putting a lump sum of money in only one short- or long-term CD. Key takeaways: * A CD ladder involves opening CDs of different term lengths and regularly renewing short-term CDs for longer terms. * This tactic lets you benefit from long-term CDs’ higher rates and short-term CDs’ frequent access to funds. * Consider a CD ladder strategy if you want to take the pressure off of timing your CDs based on whether rates rise or fall. In effect, you decrease the risk of locking in a low CD rate if rates are about to rise (and the risk of missing out on high rates if rates are about to drop). Can You Lose Money on a Certificate of Deposit? A certificate of deposit (CD) is a financial product offered by banks and credit unions that offers a fixed interest rate payment for a specific period of time. ... 1 Therefore, CDs are among the lowest-risk investments and do not lose value. Advantages Certificate of Deposit (CD). There are numerous advantages to investing in a CD, many of which make them an attractive option for consumers looking for a low-risk investment that doesn’t require a significant amount of money up front. * Safety. One of the most appealing aspects of a CD is that it's a relatively safe investment. * Predictability. Holding a CD also brings income predictability. *Flexibility of Terms. * Returns are Better than a Savings Account. * No Liquidity. * Inflation. * Low Returns. Disadvantages of a Certificate of Deposit. * Limited Liquidity: The owner of a CD cannot access their money as easily as a traditional savings account. To withdrawal money from a CD before the end of the term requires that a penalty has to be paid. * Inflation Risk: CD rates may be lower than the rate of inflation. Get a Certificate of Deposit at Bectic Finance Company Limited. CDs are one of the safest ways to store your money and earn some guaranteed interest. Certificates of Deposit (CD) are useful for people looking for a way to save money while earning a relatively high interest. They not only help you save money, but they also let your money earn more interest with no additional effort on your part. If you'd like to put your money into a certificate of deposit, become a member of Bectic Finance Company Limited today and talk with one of our member experience advisors. They'll help you figure out the type of CD that best fits your financial needs. At Bectic Finance Company Limited, we provide Bank instrument services to our clients global- UK, USA, UAE, Europe, India, China, Asia, Middle East and Africa. Contact Bectic Finance Company Limited with your request via email and we will provide you with our forms and procedures. For more information, please contact us: BECTIC FINANCE COMPANY LIMITED website : becticfinance.com Email : info@becticfinance.com Intermediaries/Consultants/Brokers are welcome to bring their clients are 100% protected. In complete confidence, we will work together for the benefits of all parties involved.

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