A certificate of deposit is also
called a CD. A CD is a kind of savings account. With a normal
savings account, you earn interest and can put money in and take
money out of it any time you want to. With a CD, you earn
higher interest because you have to leave it in the bank for a
specified amount of time. These kind of savings accounts
are for people who know they will not need to use this money for
This is how they work:
You go to the bank and get information about their CDs. You can
do this by getting a brochure or talking to someone at the
bank. You can usually tell anyone who works at the bank what
you want and they will guide you to the right person to help
You need to make some choices with a CD. The bank will tell you
what the minimum amount is for a CD. For example: The bank
might not start up a CD account unless you have at least
$500.00. If you had more than that, you could choose to put
more money in the CD.
The next choice you have is how long you want it to stay in the
CD. The bank will tell you what kind of time choices you have.
Some of these are: 6 months, 9 months, 1 year, and longer. It
is important to figure out if you are going to need the money
any time soon. For example: You start up a CD and need it for
college. You would figure out how long it is before you need
it, and set it up so that it matures (or ends) when you need it.
The bank will give you a paper Certificate of Deposit that shows
how much money you put into it and the length of time you chose
to keep it in the bank. Before you leave the bank, make sure
that the certificate agrees with what you chose. Keep the CD
paper in a safe place.
The one thing to keep in mind with a CD is that you
shouldn’t take the money out before it is time for it to
mature. It matures when it reaches the ending time that you
chose. This is an account for money that you won’t be needing
before its ending time. If you had an emergency, you could take
out money, but the bank would charge you money as a penalty for
doing that. The penalty might take all of the interest you
might have earned or even some of the money you put into it.
When a CD matures, the bank usually sends you a letter
to let you know this. They do this so that you can come to the
bank and take the money and interest out if you want to. This
would end the CD. If you were to do nothing, most banks do
something called a rollover. This means that the money and
interest are ‘rolled over’ into another CD for the same amount
of time as the first one was. This is not good if you planned
to take it out and just didn’t get there on time. It is always
important to keep track of when your CD will end. Don’t depend
on the bank to let you know. Then, if the bank rolls over your
CD, it will be because you chose to have that happen and not
because you didn’t take it out. A rolled over CD has penalties
for taking the money out early just like the original CD did.
A great thing about a CD is the fact that you get a lot
of interest. The longer amount of time you choose to keep your
money in the CD, the more interest you get. It is always a good
idea to ‘shop around’ for a CD. The amount of interest that a
bank gives in interest can change a lot from bank to bank. CDs
are a great way to save your money and safely earn more interest
than you would normally get in a regular savings account.
This page explains who
should have one, what they are and how to get one.
What is a
This page lists
different kinds of banks and the services they offer.