Grow your savings with CDs – and learn about the best CD savings strategies!
Are CDs a good way to save?
A CD, or “Certificate of Deposit” acts as a savings account and yields high returns on your investment. They typically earn a higher APY, or “Annual Percentage Yield” which is the percentage of money that is given back to you after the CD has matured. CDs earn interest – this is the actual money that is awarded, on top of your initial deposit! It’s a way of saying thank you for investing in our financial cooperative for a certain length of time.
With a CD, the idea is to invest your money without needing to access it for the length of the term. In doing this, you are treating this like a true savings account – by letting the interest build up, resulting in more savings dollars for you! The best part of a CD is that you can lock in your rate – so even if rates go down, you will still be able to earn the interest rate that you had at the beginning of your term.
After the CD matures, what you do with that money is up to you. Many people use the extra savings for a vacation, a home project, a gift or to help pay off existing debt. Or you can reinvest the money right away to earn even more!
How do CDs fit into my savings plan?
CDs typically have a variety of high interest rates, lengths of time until they mature, and initial amounts of money required for deposit. Because of this, you have plenty of options for how long you must wait until your money is available, and how much you will initially need to invest.
Many people use the length of the CD’s term as a gauge for something happening in their lives, such as an upcoming vacation or the start of a school year. You can plan to have this money ready for you at the same time as a certain event happens! Standard terms of a CD can be 6 months, 12 months or even 18 months or more.
Different deposit amounts make sure you don’t have too much money locked up in a CD, without being able to access it without penalty. We call this “liquidity” or “liquid access to your money. Although the more money you invest, the more you will get back in the end! CDs that require a deposit rate of $100,000 or more are typically referred to as “Jumbo” CDs. They usually have even higher interest rates as well. Again, more money in the long run for you!
Do CDs have an advantage over high-yield savings accounts?
It all depends on how you use them, and if you can wait until the CD matures before getting access to your money again. A lot of times, if you need to access the funds from your CD before it matures, you will incur a penalty. This could result in you forfeiting a portion or all of the interest that has been earned on the CD. There’s a chance that you could also lose some of your principal balance if there have not yet been enough dividends earned to cover the penalty. If you are looking for more liquid access to your money, we would recommend a high-yield checking account or a money market account from Premier Credit Union. But if you can wait until the CD matures, the returns can be HUGE!
Another benefit of a CD is not having any other qualifications to earn interest on them. The money sits and grows all on its own! CD rates are often much higher than a standard savings account. Meaning you will ultimately earn more money on this type of investment. Premier Credit Union usually has the best CD rates in the Des Moines Iowa area today.
No matter what kind of investments you have at Premier Credit Union, you can rest assured that up to $250,000 of your money will be insured by the National Credit Union Administration. (NCUA) Talk to one of our staff members to see if this kind of investment is right for you!
About us:
Premier Credit Union is a full-service financial institution serving Central Iowa, with branch offices in downtown Des Moines, Urbandale, West Des Moines, Sioux City and Ames. At Premier, our mission and reason for existing is to Make Life Better for you, our member!
