6 Things to Know About a CD

US Eagle Blog May 1, 2023

If you're willing to wait, a CD can be a great way to earn a high interest rate on the money you deposit. Here are 6 things to know about a Certificate of Deposit.

1. You can get a certificate of deposit (CD) through almost any bank or credit union, including US Eagle! Essentially, a CD is a promise that you'll leave a certain amount of money in an account for a specified amount of time. In exchange for not accessing the money during that period, the credit union will offer high interest rates on the deposited amount.

2. The length of a CD can vary, but anywhere between six months and five years is common. The minimum deposit is often $500. In investment terms, the money you put in is known as your principal, the length of the CD is its term, and the time it matures, or ends, is its date of maturity.

3. If you’re looking to develop structure to your savings goals, a CD can help you establish that through a variety of terms. Given the range of CD lengths, such as US Eagle’s 30-Month and 42-Month specials, the varying time spans allow you to plan and set aside your desired savings for future purchases.

4. When a CD matures, you generally have a time limit to decide what to do with the money. If you wait too long, the financial institution usually rolls over, or reinvests, your money into another CD for the same term at the current rate. If you would like to cash the CD after it matures, you can ask your credit union to move the money into your accounts, transfer it to another financial institution, or send you a check.

5. If you end up needing the money before the CD matures, you can withdraw it early, but you'll face penalties and fees.

6. Compounding is Key - What you actually earn on your CD is the yield— specifically the annual percentage yield (APY). The yield depends on whether the interest is simple or compound, and how often it's compounded. Simple interest is paid only on the principal you initially invested. Compound interest adds in the money that has been earned.

This blog content was created in partnership with Banzai. Banzai has partnered with US Eagle Federal Credit Union to bring clear, in-depth lessons to help dive into the financial topics you care most about.

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