Where Can I Open a CD Account?
A CD, or certificate of deposit, is a type of savings account where you agree to keep your money invested for a set period of time, usually a number of months or years, in exchange for a higher rate of interest than a traditional savings account would return, and a lower risk than you would find in the stock market or other potential investment vehicles. There are a number of different places where you can place your funds in a certificate of deposit.
Banks and Savings and Loans
One place that you can easily begin investing and receiving certificates of deposit is at your local bank. Traditionally, banks offer CDs with excellent interest rates, as well as with a variety of different terms.
Because CDs are an agreement to deposit a certain amount of money for a specified time period, you may be penalized for removing your funds early from the CD. The penalty is usually the loss of the interest accrued prior to the maturity date of the CD if you pull your funds out early. Because of this, you will want to plan for how to keep that money invested for the full duration of the CD so that you receive the interest that you are hoping to receive.
Credit Unions
Credit unions are like banks, only they are a membership organization with a board of directors who are responsible for reporting to the individuals who have invested their money there. This means that you have part ownership of the credit union. Credit unions sometimes have higher interest rates than banks, and also may have more flexible terms with fewer penalties for early withdrawal than a large bank might have.
Brokerage Firm
One final source of CDs is a brokerage firm that will sell you a certificate of deposit. These brokerage firms look for the best interest rates across the country and place your money into a CD based on the deals that they have negotiated. You will want to investigate the reputation of the brokerage firm, as well as its certification or other licenses that are required to trade in investments, to make sure that you are not being scammed or being sold something that will cause you to lose your money.
Choosing Your CD
Choosing the term length of your CD and the amount you wish to invest can be a complex decision. CDs are usually guaranteed by the Federal government so they are a safe investment and can provide an excellent way to make sure you earn some interest while taking very little risk with your cash. You will not earn as high a return on investment as you would with certain other forms of investing such as stocks or mutual funds.
As such, before making any investment decision, it can be a good idea to speak with a certified financial planner or investment advisor who can help you make a careful plan for how best to allocate your investment dollars.