Certificate of Deposits

FAQs

Are Certificates of Deposit (CD) Safe?

• Yes, Certificates of Deposit (CD) are considered to be a safe investment overall. They are insured by the Federal Deposit Insurance Corporation (FDIC) up to the maximum amount allowed by law, so your investment is always protected. CDs also have a fixed interest rate and term, providing you with a predictable return on investment with minimal risk.

Can you add money to a Certificate of Deposit (CD)?

• Once a CD is established, you cannot add additional money to a Certificate of Deposit (CD). When you open a Certificate of Deposit, you select a maturity term and make an initial deposit. Transferring additional funds after this point is typically not an option.

What happens when a Certificate of Deposit (CD) matures?

• When a Certificate of Deposit (CD) matures, you have several options. You can withdraw the principal and the interest earned, reinvest the funds into a new CD, or transfer the money to another account. It’s important to note that some CDs automatically renew at maturity. To understand the specifics of your account and avoid any surprises, check with your banker.

How do CDs differ from Savings Accounts?

• CDs typically offer higher, fixed interest rates, while savings accounts have lower, variable rates. CDs require you to keep your money deposited for a fixed term, and early withdrawals can incur penalties. Savings accounts allow for more flexible access to deposit or withdraw funds without penalties.

What are the withdrawal penalties for Certificates of Deposit (CDs)?

• When you invest in a Certificate of Deposit (CD), your funds are locked in for the set term you originally chose. If you need to withdraw your money before the CD term ends, you may incur a withdrawal penalty. With a maturity period of less than one year, the penalty equals the loss of simple interest for three months. With the maturity period greater than one year, the penalty equals the loss of simple interest for six months.