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Certificates of Deposit

Updated: January 7, 2009
IF YOU`RE LOOKING FORWARD TO A NICE BIT OF EXTRA CASH IN THE FORM OF A YEAR-END BONUS, INVESTING IN A CD MAY BE A GREAT CHOICE! SUSAN ABBOTT FROM BUSEY BANK HAS ADVICE TO HELP DECIDE IF CDS ARE A GOOD INVESTMENT FOR YOU: Q1: WHAT IS A CD (CERTIFICATE OF DEPOSITA special type of deposit account with a financial institution that typically offers a higher rate of interest than a savings account. Low-risk investment that can be federally insured up to $100,000 If you have other accounts with the institution, you`ll want to make sure they are all insured. FDIC has a tool called EDIE you can use online at www.fdic.gov Q2: HOW DOES A CD WORK? When you purchase a CD, you invest a fixed amount of money for a fixed period of time, from 1 month to 10 years or longer. Minimum deposits can range from $500 to $100,000 The financial institution issuing the CD pays you interest at regular intervals. At maturity, you`ll receive all of your original investment, plus the accrued interest. If the CD is redeemed before maturity, you may have to pay an "early withdrawal" penalty. Q3: IS THERE ANYTHING WE SHOULD LOOK OUT FOR The interest rate may be variable, or it may be fixed for the term. Understand what will take place when your CD matures will automatically renew, and if so, what interest will you earn? Q4: WHO SHOULD INVEST IN CDS? CDs can be good for young and old alike. People who want to know their money is safe, federally insured, and who desire a predictable source of income.

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