Things to Consider When Opening A CD

The time has come where you have a small nest egg in your savings, and you'd like to see it grow just a little faster. You may be considering opening a Certificate of Deposit. If you are, these are some questions you may want to ask yourself, and then discuss with us over at #SuperiorCreditUnion.

A Certificate of Deposit is an agreement between a member and a financial institution. The member agrees to deposit their money for a pre-determined period of time and in return the institution agrees to offer a higher interest rate than a regular savings account.

1. Are you saving for a long term goal, or do you want to create an income ladder, where CD's are maturing at regular intervals? Defining your personal goal of investing your money is the first thing you want to determine, as it will influence the rest of your decisions. If you would like a regular stream of funds to be available to you, consider opening several CD's, each with a progressively longer term than the last.

2. What term would you like for your CD? If you are saving up for something, having it mature right before your purchase would be ideal, whereas if you are just putting money away to gain interest, longer term may be better.

3. What happens if rates change while my money is in a CD? Will I lose money? At #SCU, your interest rate locks in at the time of signing up for your CD, so no worries if interest rates drop over time, you are protected. CD's are considered a low/no risk investment, because you won't lose money, only gain it. The question is, how much and how fast? If rates raise, you will have the chance to lock in the new rate when your CD matures.

4. Can I continue to add money to the CD? Some financial institutions allow a one or two time "top off" of your CD, where you can add funds to it during the term. Most places, however, usually do not do this, so consider how important that factor is for you.

5. Finally, are you going to need this money before the CD would mature? If you won't, then a CD may be your best option. Penalties for early withdrawal can be hefty, so consider that when deciding if it is right for your, or which term best fits your needs.

Stop in any time to discuss this and much more with any of our staff, and we would be happy to help you!