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CD accounts are bank accounts which usually provide a fixed and higher interest rates than typical savings accounts and and last for a predetermined amount of time. This page is a guide on how to open a CD account.
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Introduction
- CD accounts are an abbreviation for certificates of deposits and offer specific benefits when compared to typical savings accounts. They can provide several benefits, such as a fixed interest rate and an interest rate usually higher than typical savings account rates. Most CD accounts in banks are insured by the FDIC. Money from a CD account can only be withdrawn when the account expires. Some banks allow the withdrawal of money earlier, but this could result in a fee or might result in the loss of interest rate accumulated.
Step 1: Research
- Before opening a CD account, research different options, terms and interest rates.
- Some CD accounts are relatively short-term and only last for a few months; others last for years. Determine which type is most appropriate for your needs and situation.
- Make sure to compare interest rates, as they can differ significantly between different companies. A good interest rate is one of the best benefits with opening a CD account, so make sure you don't miss out on it.
- Choose a short-term CD account if you believe that the interest rate will increase. That way you can open a new account with a better rate if that happens.
- Not all financial institutions are federally insured. For protection or your money, consider one that is.
Step 2: Where to Open it
- After researching your options, research the financial institution that has the terms and interest rates that appeal to you.
- Verify with the Better Business Bureau that the financial institution is legitimate and stable.
- Visit the bank personally to discuss the terms. Although you can always get answers over the phone, an in-person discussion usually leads to more questions and more elaborate answers that will better help you to determine if you are making the right choice.
- If you are opening a CD account with a broker, contact the National Association of Securities Dealers or the Central Registration Depository for background information and to find out if any complaints has been filed against it.
