High Yield Savings CD
Certificates of Deposit (CD’s) are one of the safest investment options on the market. If you have already made your money and want to move away from high risk/high yield investments into something a little less aggressive, a high yield CD is the best option for you.
CD’s earn you interest on your money in a similar way as a savings account does, but your earnings tend to be somewhat higher with a CD account. This is because when you purchase a CD, your bank is improving upon your investment by offering you higher interest, and they expect that you will keep your money in the high yield CD for a specified period of time. They make money by using your money as loans for other customers, and they pass some of those earnings on to you via the higher interest rate.
First, think about how long you are willing to invest your money for and what kind of return you want to see on your investment. CD’s with longer maturities (time commitments) pay off with higher interest rates than those with shorter maturities. By promising the bank that they can use your money for a longer period of time you are securing a higher return rate on your investment. However, be sure to consider all your options because sometimes there are exceptions to this rule. Also, keep in mind that rates will rise and fall as the economy generally dictates them.You need to decide whether or not you should lock your money up long-term for a higher rate, or whether you should wait and see if rates will be more favorable in the near future.
Getting a CD is easy. Meet with a representative at your bank and ask them about what kind of CD’s they offer. You’ll need to fill out some simple paperwork and complete a number of disclosure forms. When everything is completed, signed and approved, your bank will move a specified amount of money from your savings or checking account into the high yield CD. Although CD does stand for Certificate of Deposit, you will not actually receive a certificate; you’ll just see a new CD category for the deposit on your regular bank statements.
Eventually, CD’s begin to pay interest. You can choose to withdraw the interest or reinvest in your CD. Reinvesting the money will help your money grow faster as the interest compounds. When your CD matures, or in other words, when you have reached the end date specified when you opened the CD, you usually have a brief window of time to decide if you want to reinvest your money into a new CD or withdraw it. If you do nothing, most banks will automatically reinvest the full amount into a new CD. However, be sure you know the policy. If you need the money right away and your bank automatically rolls is over into a new CD account you will not be able to access it without penalties.
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