Learn About a Certificate of Deposit and How It Can Help You!

A Certificate of Deposit is a promissory note that is offered by acertificate of deposit bank.  CDs offer many attractive features such as:

  • CDs have a maturity date, a specific fixed interest rate and are able to be issued in any denomination
  • CDs are similar to savings accounts in that they are insured and risk-free, though you usually earn more from a CD
  • Most CDs last from one month to five years and usually with a longer  term you receive a higher rate.  Similarly, the more money you invest, the higher the rate of return
  • If you withdraw the funds before your CD matures, you can be hit with a penalty, so keep that in mind

When purchasing a CD, an essential concept to understand is APY (annual percentage yield). Let us look at it:

  • APY does take compounding into account.  The formula for APY would look like this: APY= (1 +  Periodic Rate)#periods-1  

Next time you are near a branch be sure to ask a Personal Banker about a Certificate of Deposit so you can decide if it is right for you! 


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