How Do Certificates of Deposit Work, and What Are the Benefits of Getting One?

There are many ways to put your money to work. You want to find a secure place to save your money that will yield maximum returns. While most depositors use savings accounts to stash their cash, putting your money in a certificate of deposit (CD) gives a higher return in exchange for locking their money away. Savers want a financial strategy that yields maximum return with minimum risk. That’s why more savers are purchasing CDs (also called “share certificates” at credit unions). 

Read on to learn what CDs are and get answers to questions such as how do certificates of deposit work, and what are their advantages?

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Pros and Cons of Certificates of Deposits (CDs)

Making the right investment move to meet your financial goals and suit your budget can be tricky—and frustrating. Many people just dump any extra cash into a savings or money market account. That’s a safe strategy, but the interest rates are very low. There are smarter ways to put your savings aside and yield a better return without risk.

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Certificate of Deposit for New Investors

Americans have always been poor savers. The recession put fear into many consumers, but the recent economic news has done little to encourage saving. Growth is strong, housing prices are up, and unemployment is low. However, the trend that should alarm Americans is that wage growth continues to be slow and is barely keeping pace with inflation. Personal savings rates have dropped to 2.4 percent, which is the lowest since 2005. Yikes!

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