How Does a Certificate of Deposit Work?

How Does a Certificate of Deposit Work?

Are you looking for ways to “Save Smarter?” Credit unions have many tools to help you do just that, but one of the easiest is the Certificate of Deposit. A Certificate of Deposit, or CD, is a secure form of time deposit. This means your money stays in the bank for a certain amount of time to earn a promised amount of interest.

Your money stays “frozen” in a CD, meaning there’s no temptation for you to spend it! In the long run, you’ll earn more interest than you would in a traditional savings account. In fact, at credit unions a CD will yield more interest than a savings account would more than half the time. Only specific institutions will offer these kinds of accounts, though. Credit unions and banks will pay extra to hold these sums of money for months or even years.

The National Credit Union Association will insure a CD for up to $250,000, like most deposit accounts. The only real risk to you is the penalty you’d pay if you withdrew your money before the agreed-upon end of the CD term. Remember: the longer the term, the higher the interest rate on your CD will be!

Having more money in your CD can potentially raise your annual percentage yield as well. This is the return on your deposit that comes from compounding interest over an entire year. You can compare three-year and five-year CDs to find the best yield for you.

Depending on your circumstances, you can benefit from a particular type of CD. There are individual retirement CDs and even jumbo CDs, which usually have a requirement of at least $100,000. Your credit union can educate you on the specific benefits of a Certificate of Deposit and help you find the best fit for you!

No matter where you are in life, Y-12 FCU of Knoxville has what you need to help you grow financially. From savings accounts that pay you dividends now and retirement accounts that let you save for later, to Share Certificates and Money Market Accounts that help you earn more over time. Whether you’re saving for your kids, your dream vacation, your holiday gift giving, your healthcare expenses, and more..Whatever your goals, we’re here to help you achieve them. Click here for more information on the incredible options we have for you to choose from!