The ABCs of a CD (Certificate of Deposit)

December 8, 2022

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When it comes to finding the best savings account to meet your long and short-term needs, there are many options, one of which is a Certificate of Deposit (also known as a CD). CDs were once a paper document from a financial institution that served as proof that your funds were being held in a bank for an agreed-upon amount of time. Though we’ve come a long way from paper receipts, CDs generally still work the same way.  

When you choose a CD with BayFirst, the bank accepts your deposit for a fixed term (usually somewhere from six months to five years) and pays you an annual percentage yield (APY) based on a fixed interest rate until you reach that date. Once the term is up, you can cash in on your savings in the amount of your original deposit plus the interest you’ve earned over the course of the term. Or, you can roll your balance into another CD at the current interest rate.

The Cons:
  • Unlike other savings account options, CDs don’t allow easy access to your money until your term ends.
  • Though many choose CDs because they come with minimal risk, if you cash in your CD before it matures, you will likely have to pay a penalty. So, be sure to ask about this penalty before agreeing to the terms.
  • You won’t be able to add funds over time as you would with other high-yield savings accounts. You’ll just provide a lump sum upfront without the option to contribute more.
The Pros:
  • CDs can provide a great return without the risk and are a safe place for money you’re setting aside for future use.
  • The interest rate on a CD is usually higher than a regular savings account, and the longer you commit funds to a CD, the higher the interest rate
  • CDs don’t have monthly fees.
  • Like regular savings accounts, certificates of deposit are insured the Federal Government up to $250,000.
  • You can easily start the process of opening a CD online or in person.
  • At BayFirst, you only need $1,000 to open.
When to choose a CD
If you are saving up for an expense in a few years or just want a place to keep your savings that pays a high APY and keeps your funds out of reach in the short term, opening a CD is a great option. But remember, investing in a CD is not the fastest way to grow money. But if you take advantage, it can play a significant role in your overall savings plan.

So, is a CD right for you? Talk to an expert about your saving strategy today by filling out the form below or explore the other personal account options available through BayFirst. 

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