Certificates of deposit (CDs) are just one of many options available for saving money. However, CDs offer benefits you may not find with other savings solutions. Here are five reasons CDs can be a good addition to your financial strategy.
- Safety. CDs, much like savings accounts, are safe places to keep money. Just make sure to buy them from a financial institution insured by the FDIC.
- Take advantage of special rate offers. Limited time special CD rate offers may become available. These CDs allow you to earn interest at a higher rate than the average rate available at the moment. Sign up to be notified of Capitol Federal’s special rates.
- Guaranteed Returns. When you open a CD with fixed rates and terms, you know exactly how much interest you’ll be earning during the time frame. This can make it easier to plan for future goals since you can more accurately estimate how your money will grow in CDs.
- Maturity dates can help you avoid temptation. Most CDs have fixed terms. Unlike a checking or savings account, this means you must keep your money in the account for a specific period. If you withdraw early, you may face penalties. This can help you resist the temptation to take money out of the account before it has matured.
- If you’re concerned about not having access to your money, a CD laddering strategy allows you to set up several CDs with different maturity dates. This gives you the ability to access part of your funds at different intervals, should the need arise.
- Earn higher interest rates than traditional savings accounts. CDs can offer higher interest rates on deposits than a traditional savings account or money market accounts. The reason being is that you’re agreeing to keep your money in the CD for a certain time period.