YOUR FINANCIAL QUESTIONS ANSWERED
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What type of Certificate of Deposit should I set up?
After researching a Certificate of Deposit (CD) and deciding it’s the right option for you, it’s important to then navigate the different types of CDs. Traditional CDs are a popular choice as they have a set term with an unchanging interest rate and payment frequency. Details may vary by financial institution but the established rates remain constant during the CD’s life. Other CD options include:
- Liquid or no-penalty CD. Investors get the same benefits of a traditional CD but have the option to withdraw money with no penalties. The interest rate is often lower than a traditional CD.
- Bump-up or Step-up CD. Similar to a traditional CD but with the option of increasing your interest rate if the bank or credit union offers a higher rate during the CD term.
- Callable CD. The interest rate may be higher than a traditional CD, but the issuing financial institution can “call it off” at any time, cutting the CD life short and cancelling future interest payments.
It’s important to assess your financial needs when deciding on a CD type. Will you potentially need the option to withdraw money from your CD? Are you willing to risk the CD being called off for the potential of a higher return?
You can gather specific information from your bank or credit union about the CDs they offer. Education Credit Union, which serves Amarillo, Bushland and Canyon, Texas, offers traditional CDs with minimum earning balances ranging from $5,000 to $10,000.