Money Management: 4 Benefits of Having a CD Savings Account
Setting money aside for the future will always be to your advantage. You have options when you are considering opening a savings account. A Certificate of Deposit (CD) account is one such avenue for investing your savings. Here are some reasons for choosing a CD savings account.
Higher Earning Potential
Typically a longer term CD savings account will offer a higher rate of return than a traditional savings account. Some CDs offer a larger interest rate on your initial deposit depending on the bank you choose.
If you can do without the money for more than a couple of years, you have more earning potential. Shorter term CDs can offer an interest rate that is higher than a standard savings account.
The bank has more or a vested interest in you leaving the money in the account for a longer period of time. They will offer you more of an incentive with a longer term CD.
Wide Range of Options
When deciding where and how you want to invest your money, shop around. Different banks may have a different rate of return. You can also choose how much money you are willing to put into a CD account.
For obvious reasons, it is to your benefit to invest a higher amount of money. This will give you the best rate of return. Some banks may even offer a higher interest rate if you are willing to invest more money. You can also decide the length of time into the CD reaches maturity.
Some banks allow you to put the money into an account for just a few days on up to five years.
Ensured Amount
Since the rate of return is fixed, you will know the exact amount of money that will be available at the end of the term. This can be to your benefit if interest rates were to drop after you invested into your account.
Unlike with a traditional savings account, your rate of return would remain the same. Make sure to choose a bank that is FDIC insured. FDIC stands for Federal Deposit Insurance Corporation.
This means that even if the bank were to go out of business, your money would not be lost. Your money will only be insured up to $250,000.
Personal Loans
Once your CD account has reached maturity, you can use this money in securing a personal loan. It could be used for a down payment on a house or to get a loan to purchase a car.
You also have the option of getting a secured loan with the money from a CD investment. You don’t even have to wait for the term to reach maturity to qualify for a secured loan.
This is useful if you are trying to rebuild your credit or eliminate other forms of debt. Many people who have declared bankruptcy use this as a first step in rebuilding their credit score.
Effective management of your money is about planning for the future. Take advantage of the opportunities of investing in a CD savings account.
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Category: CD Savings Account
