Share Certificates (CD)
One could think of CDs as the greatest money-back guarantee in the history of the world. Simply pick the term to deposit your funds and earn dividends that are giant compared to regular savings.
There are no risks, no stocks to watch—just a guaranteed, fixed-rate return with federal insurance. CDs can be used to diversify investing or to save for a specific future event without the temptation to spend.
- Summary
- Greater dividends than savings accounts
- Fixed rates, guaranteed for length of term
- Terms from 3 months to 5 years
- Rates increase with each longer term
- Ladder CDs to increase liquidity (see tab)
- Penalty on earnings for early withdrawal
- $2,500 minimum deposit to open*
- Federally insured to $250,000 by NCUA
*Minimum deposit for 3-month CD is $10,000. All other regular term certificates have a minimum $2,500 deposit.
- Laddering
A great way to build liquidity into certificates—and to make the most of rate changes—is to ladder your CDs.
Laddering simply means dividing your money among several certificates, each with an increasingly longer term, instead of putting all your money into one certificate. This way, part of your investment becomes available periodically rather than locking the entire amount for the longest term.
In addition to making funds available if you need them, this gives the opportunity to take advantage of rates that are increasing since you can reinvest the CD that matures at the current rate.
