The Basics of a Certificate of Deposit (CD)

CDs, or certificate of deposits, are popular savings options that are easy to find at most financial institutions, but many of us still have questions about them. Whether you’re not sure if it’s a physical CD that might get lost in your car on the way home or wondering some deeper questions, we’re here to help you navigate CDs and what they can do for you.

What Is a CD?

A CD is one option you have when you’re looking to save money within a credit union or bank. When you open a CD, you agree to a fixed interest rate and a set maturity date. That’s a very important date, as you won’t be able to access the money in the CD until that time—unless you’re willing to pay a fee. Dates can vary, but most CDs are one to five year commitments.

If you can agree to wait to access your money until that future maturity date comes, CDs are a low-risk and cost-effective way to save your money and make a little along the way. They often have low to no annual fees and are insured up to $250,000 per depositor by the Federal Deposit Insurance Corporation (FDIC).

Know that, if you’re signing up for a CD, you’re signing up for low risk and steady growth. For example, with iTHINK Financial’s 2.30% annual percentage yield (APY), if you put away $5,000 for the duration of our 24-month term, you’d see $230 in interest. Unlike other risky investments, CDs are reliable and safe, although the return might be modest.

Is a CD for Me?

Intrigued by the idea of opening a CD? Before you jump in, compare your financial goals to this quick checklist and see if you’re a good candidate to open a CD:

• You’re willing to put your money away for a period of time and understand that you’ll be faced with a fee if you decide to access it.
• You’re looking for a longer savings commitment.
• You’re prioritizing safe, low-risk savings over rapid savings growth.

If those apply to you, you might be ready to open a CD. Your nearest iTHINK Financial location is ready to help you every step of the way and bring you closer to healthy, happy savings.