What to Look for in a CD

Read this tip to make your life smarter, better, faster and wiser. LifeTips is the place to go when you need to know about CDs and other Financial Planning topics.

What should I look for when choosing a CD?

What to Look for in a CD

A CD rate comparison shouldn't just be about rates. If you look at the rates, a 20-year CD offers a tremendously higher return than a 5-year CD, no matter what financial institution you consider buying from. That doesn't necessarily mean that a 20-year CD is a good investment.

CD Rate Comparison Considerations

Here are 4 things to keep in mind when doing a CD rate comparison:

  1. Term of the CD: You must choose an investment time frame that you're comfortable with when comparing CD rates. Remember, in order to get the rate you're promised, you must leave your principal invested the entire term.
  2. FDIC insurance: Make sure the financial institutions are FDIC insured and consider whether or not you already have the maximum amount of money that can be insured placed with them. If so, you might want to put your money in another bank's CD.
  3. Bank history: Does the bank have a long-standing history, or is it possible that it might be absorbed by another bank? Is that something you're comfortable with?
  4. Interest: Interest may not be the only thing to consider, but it is one of the things you should consider when you compare CD rates.

   

Comments

Nobody has commented on this tip yet. Be the first.



Name:


URL: (optional)


Comment:


Not finding the advice and tips you need on this Financial Planning Tip Site? Request a Tip Now!


Guru Spotlight
Christina Chan