What’s the first thing that jumps into your mind when you hear the term CD? Is it the small round thing that rarely can be seen now, or the financial certificate of deposit? The former one is gradually out of fashion, but the latter one, is pretty popular right now.
What is a Certificate of Deposit (CD)?
A certificate of deposit is a financial product offered by banks and credit unions. It shares some similarities with a savings account. Top-paying CDs usually pay higher interest rated than savings account and money market accounts, in order to attract people to leave more funds on the deposit for a fixed period of time.
How does a CD work?
If you know how to open a savings account, you must know how to open a CD. The procedure is quite similar. The difference is what you are agreeing to when you sign your name.
The interest rate: It is fixed. The bank can not lower the rate and therefore reduce your earnings; however, you may also lose the opportunity to take advantage of a higher-paying CD.
The term: it is the length of time you agree to leave your money within the bank to avoid penalty (e.g., 6-month CD, 1-year CD). On the “maturity date”, the term ends and you can withdraw your money.
The principal: this is the amount you agree to deposit when you open your CD.
Pros & Cons
A CD is a good investing choice if you are a conservative investor. Though CDs may not bring as much gains as bonds or stocks, they also don’t bring a risk of downturns. The biggest advantage is that CD offers a higher rate and pays you stably. Also, if you open the CD with a FDIC bank or NCUA credit union, it is federally insured.
However, there are some downsides of CDs.
The term of a CD is fixed, which means that you can’t make an early withdraw without penalty in most cases. Typically, you will earn less than stocks and bonds over time.
The low liquidity of CDs brings some inconvenience; however, it can also guarantee you with sufficient reserves on hand in case of an emergency. The money in the CD will never decrease, which is good to conservative investors.
If you want to apply a CD but are worried about the term in case of emergency, then you can try No-Penalty CDs. A no-penalty CD is much like a standard CD with a fixed term length and a fixed interest rate. The difference is that it allows you withdraw your fund before maturity date without charging penalty. If you want to make an early withdrawal, you have to withdraw all the funds.
How to choose CD with highest rates?
Frankly speaking, CDs are among the most valuable investments around. They offer of 100% safety of principal. CDs are a perfect allocation in your portfolio, guaranteeing that at least some of your investments will be protected in the market.
The question is, which CD to choose?
We all know that in investment, cash is king. After all no one can predict the market. Only cash in your hands guanrantees you from the changing market. Therefore, we’d recommend no-penalty CDs for you, since you can have access to your funds whenever you want without penalty.
Many banks and financial institutes provide no-penalty CDs. Among all those, the one offered by CIT Bank currently has one of the highest interest rates available anywhere.
CIT Bank 11-Month No-Penalty CD
- APY: 0.50%
- Minimum investment: $1,000
- FDIC Insured, up to $250,000 per depositor (including all other deposits held with CIT Bank)
The rate is fairly competitive and exceeds the national average for CDs. The APY of this no-penalty CD exceeds the rate of regular-terms CDs provided by CIT Bank. We all know that a higher on CD accounts is essential to fight against inflation. This CD can help insulate your purchasing power to some degrees.
The application for a CD is quite easy. You can just click the link and follow the guide.
This CD offers convenience in a different way. It is easy to open your account and start saving online, and you can manage your account online 24/7.
CIT Bank also offers helpful educational resources on saving money, along with calculators to help you estimate your savings growth, prepare for retirement or create a plan for paying off debt.
If you would like more information, you can visit the CIT Bank website.