Ask Yourself These Essential Questions Before Opening a CD This Year
By: Maurie Backman |
Updated
– First published on Nov. 8, 2023
One benefit of putting money into a CD versus a regular savings account is that you might get an opportunity to earn more interest on your parked cash. CD rates are often higher than the rate you’ll get in a savings account. Also, when you open a CD, your interest rate is guaranteed throughout its term, whereas with a savings account, you might start with a higher rate only to see it fall weeks or months later.Now, it just so happens that CDs are paying pretty generously these days. But before you rush to open one, make sure to address these important questions.1. Am I sure I don’t need the money for something else?When you put money into a CD, you’re making a commitment. You can technically cash out a CD at any time, but if you do so before the end of its term, you’ll face a penalty (the exact amount of which will depend on the length of your CD and your bank). So it’s best to only tie up money in a CD that you’re certain you won’t need for its duration.To that end, think about your upcoming financial needs. The holidays will be here soon. Are you sure you won’t need the cash you’re thinking of putting into a CD to buy gifts? This is just one example, but the point is to make certain you can really afford to part with your cash for six months, 12 months, or however long your CD term is.2. Am I planning any large…
