If you’re searching the internet for a “CD near me,” then Riverview Bank may have just what you need. We offer a variety of certificate of deposit (CD) opportunities to help you grow your money more quickly.
But before you open a CD, or Certificate of Deposit, account, you should explore whether it’s the right move for you or whether you’d be better off exploring other savings options. Here’s a look at how CDs work, including their advantages and disadvantages and what you should know before opening one.
What Is a CD?
A CD account is similar to a savings account. You deposit a certain amount of money and earn interest on that amount. However, unlike a traditional savings account, which usually allow you to access the money when you need it, most CDs have a specific term during which you can’t use or withdraw your funds without paying a penalty. CD terms vary in length. For example, there are short-term CDs that only last a few months and longer-term CDs that span a year or more.
CD Advantages
Higher Interest Rates
You may be wondering what makes locking your money away for a period of time in a CD worth it. Your money would be just as safe in a traditional savings account, and you would have access to your funds whenever you need them. The answer is the interest rates. Typically, CDs offer higher fixed or variable interest rates than traditional savings accounts. So if you’re looking for a savings account that allows you to maximize your returns, opening a CD could be the way to go.
Low Risk
A major benefit of CDs, compared to other investments, is that they offer guaranteed returns. On the other hand, when you deposit your money in an investment account, you may have the potential to grow it quickly, but you also risk losing some or even all your money. There’s no guarantee that you’ll see a return on your investment. With CDs, as long as you leave your money in the account for the full term, you’re guaranteed to earn the full amount of interest on your deposit.
CDs have another feature that makes them lower risk than other investments: They are insured by the FDIC (Federal Deposit Insurance Corporation). The FDIC protects accounts up to $250,000 should the financial institution fail.
CD Disadvantages
Limited Liquidity
Unlike a traditional savings account, when you store money away in a CD, you agree to leave that money untouched for an agreed-upon term. While you can typically access the funds if you absolutely need them, you may incur early withdrawal penalties.
With CDs, there is also the chance that your money could lose some value. Once your CD reaches maturity, you should walk away with more money than you had when you opened your account. However, if inflation outpaces the rate at which your money is growing, it may not be worth the same amount that it was at account opening.
Your money could lose some of its spending power when locked away in a CD. If there is a period of rising inflation, for instance, the risk of losing some of that purchasing power will be higher.
Potential Penalties
Your CD reaches maturity at the end of its term. This is the point in time that you can withdraw your money penalty-free. As mentioned before, you could have a short-term CD lasting just a few months or a longer-term CD lasting a period of a year or more. Typically, the longer the term, the higher the interest rate and the more money you’ll likely accrue.
However, if you need to access your money before the maturity date, you may be hit with some early withdrawal penalties. If these penalties cost you more than you were able to accrue in interest, you could be forfeiting the money you’ve earned on the CD and possibly a portion of the amount deposited. As a result, you may wind up losing some money if you take an early withdrawal.
Keep careful track of your CD maturity date. Once your CD matures, you must withdraw the money or roll it over into another CD. If your CD matures and the grace period for withdrawal elapses, your CD will more than likely automatically renew.
Minimum Deposit Requirements
Many CDs have minimum deposit requirements. These minimum amounts may be higher than what you would need to open a regular savings account.
Additionally, once you open a CD, you’re typically unable to deposit any additional funds into the account. With a traditional CD, you can only deposit the initial amount, whereas with a traditional savings account, you’re able to make ongoing deposits.
Is a CD Near Me Right for Me?
So, is a CD the right choice for you? That depends on a number of factors. First, take a look at market conditions. If inflation is rapidly increasing, you may want to hold off on opening a CD for now.
You should also look at your financial situation. Are you able to leave your money untouched for a while? Be sure that you have emergency savings that are easily accessible before opening a CD account. Otherwise, you may be tempted to withdraw your funds early to cover those emergency expenses.
If you do have emergency savings and are saving toward a specific financial goal, then a CD could be a great way to grow your money more quickly. But always be sure to do your research so you can find the best financial product for your specific needs.
For instance, some high-yield savings accounts may offer interest rates similar to those offered on CDs. Compare options and decide which is best for you.
Leaning toward a CD? Contact Riverview Bank to explore your options. Our CDs earn competitive interest rates, which means you’ll get more bang for your buck. Come see what we’re all about and how you can grow your savings faster with the community bank you can trust.