What is a CD?

What is a CD?

Handling your finances can be dizzying, especially when it comes to investments! There are so many options for a person to invest money that it isn't hard to feel overwhelmed. Perhaps you've heard the term certificate of deposit—or, as many call it, CD—but don't know what type of investment it is, or whether it's right for you. So if you're asking yourself just what is a certificate of deposit—you have nothing to worry about! We'll answer that, along with some other questions you may have about CDs.

What Is a Certificate of Deposit?

"So, what is a certificate of deposit?"
A certificate of deposit/CD is a common, low-risk investment option, in which a person sets aside money for a given period of time (called a term or duration). That money accrues interest based on a rate set ahead of time. That said, a certificate of deposit is sort of like a savings account with a restriction on when the holder can access his or her money. CDs are backed by the National Credit Union Administration if issued through a credit union, and by the Federal Deposit Insurance Corp. if through a bank.

"Why would I get a CD?"
Certificates of deposit are one of the safest investment options available. This is for two reasons:
1 Your interest rate is set ahead of time. As long as you set the money aside until its maturity date (the end of your term), you are guaranteed a certain amount of interest. Because you're discouraged from withdrawing money, the interest rate is higher than that of a savings account. What's more is . . .
2 You don't have to do anything other than not touch the money!
No risk, no work—and more money when it's all said and done. A CD is a great option if you're just starting to think about investments. If you've been sitting on some savings for a while now, you might as well have already gotten one!

"Can I withdraw my invested money?"
This is the difference between an everyday savings account and a certificate of deposit—withdrawing money from a CD before its maturity date often incurs penalties. Look at the fees and penalties carefully before deciding on a CD, and only invest an amount you're sure you won't need during the term.

"How long will I have to invest this money?"
Each financial institution is different, but most offer a wide variety of terms—anywhere from just a few weeks to several years. If you opt for a longer term, you'll likely have a higher return.
If you want to know more about this low-risk investment option, ask your financial institution!

Click here to learn more about BluCurrent's great CD rates. 
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Are you interested in joining a credit union? If you live or work in southwest Missouri, check out BluCurrent Credit Union. With our unbeatable loan options, 6,800 shared branches across the country, and fantastic customer service, we might be the perfect financial service for you. In addition to our three locations (two in Springfield and one in Nixa), we also offer online and mobile banking for your convenience. Plus, we provide nationwide ATM fee refunds with our checking accounts! To learn more about our services and benefits, please stop by one of our branches or explore our website. We would be happy to help you further understand the differences between banks and credit unions.

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