What is a certificate of deposit? If you are looking for a long-term strategy for growing your money but want to avoid the risks of the stock market, a certificate of deposit (also called a CD) might be a good choice for you.
Keep reading to learn more about what a certificate of deposit means and how it can help you reach your financial goals.
A certificate of deposit, or CD, is a financial product sold by banks and brokerage firms. CDs offer a fixed interest rate for money that is held in an account for a certain number of months or years.
When the CD reaches maturity (i.e., the end of its term), the holder may withdraw the money or extend the CD for an additional term. It is also important to note that interest earned from a CD is typically subject to income tax.
Most certificates of deposit offer a higher interest rate than other savings and money market accounts. The CDs grow at faster rates because the interest is compounded, or periodically added to the original amount contributed.
CDs are considered a low-risk financial product and typically present a good option for individuals who want to grow their savings without the risk of the stock market.
One of the reasons that banks offer a higher interest rate on certificates of deposit is because the holder gives up liquidity, or immediate access to their funds, for the term of the CD. Typically, the longer the term of a CD the higher the interest rate.
An individual who withdraws money from a CD before its maturity usually must pay a financial penalty, and he or she could forfeit several months of interest. Individuals should plan for contingencies by keeping some savings in more accessible accounts, such as a traditional deposit account, to best maximize their earnings on the certificate of deposit.
Synchrony Bank offers a wide range of financial products — including certificates of deposit, savings accounts and money market accounts — to help its customers grow their savings. Synchrony Bank offers its customers 24/7 online access, award-winning customer service and other perks, including free identify theft resolution+.
Call Synchrony Bank at 1-844-345-5789 or visit us online to learn what opening a certificate of deposit could mean for your financial goals.
Wall Street Journal: http://guides.wsj.com/personal-finance/banking/what-is-a-certificate-of-deposit-cd/
US News & World Report: http://money.usnews.com/money/blogs/my-money/2014/10/21/why-you-should-move-your-savings-to-an-online-bank
+ Identity theft resolution services are provided by CyberScout™
*ANNUAL PERCENTAGE YIELD (APY): All APYs are accurate as of 07/11/2018.
APYs are subject to change at any time without notice. Offers apply to personal accounts only. Fees may reduce earnings. For Money Market and High Yield Savings Accounts, the rate may change after the account is opened. For CDs, a minimum of $2,000 is required to open a CD and must be deposited in a single transaction. A penalty may be imposed for early withdrawals. After maturity, if you choose to roll over your CD, you will earn the base rate of interest in effect at that time. The APY shown for CDs and IRA CDs is for a 60-month CD with a balance of at least $25,000. Click here for all CD rates and terms offered.