Certificates of deposit, also called CDs, are bonds that pay the bearer interest. Many people choose invest in CDs with their banks instead of simply putting money into their savings accounts because they are an attractive option in an unpredictable long-term economy.
If you want to earn higher interest than you would receive in your savings account, you can agree to a certificate of deposit with your bank. Like with other bonds, the profit amount is guaranteed, as is the length of the investment. The bank is obligated to pay you the agreed-upon amount of interest at the agreed-upon date. Unlike stocks, certificates of deposit will not lose value.
The bank will use your money to lend to others, the same as when you deposit savings. However, you receive more interest because you cannot touch the money in your certificate of deposit until it has matured or reach the end date. You are giving the bank a guarantee that you will not demand your money back until after a certain amount of time and therefore they pay you more for it.
Certificates of deposit are popular with investors because they are often inexpensive, short-term, and convenient. Instead of putting money in a savings account, an individual can place that money into a certificate of deposit and after six months to a year the individual receives the initial money amount plus some. Some CDs can be started with only $100; however, most CDs are for amounts between $500 and $10,000.
For those with large savings, there are large CDs for $100,000 or more. While the interest is still low compared to other things, it is considerably more than a savings account would generate. Therefore, a certificate of deposit is a sensible option if you have money you are confident you will not need for a year.
There are some sites that can help potential investors find the optimal interest rates for certificates of deposit based on how much they are willing to spend and how long-term they are willing to leave the money in the bank. Consumers can search the best interest rates for certificates of deposit ranging from time frames of one month to five years. Consumers can also research certificates of deposit from national and local banks. This allows you to look into multiple opportunities and find the most profitable investment.
