Are CDs good investments?

One of the safest investments out there is a Certificate of Deposit or a CD. Unlike investing your hard-earned money into the stock market, investing your money into a CD is similar to a savings account. The difference is that once the money is in the CD, you cannot touch it for a set time period and you will gain a bigger interest rate than a savings account, allowing you to turn a favorable profit. You must agree to the terms of the CD, which normally means your money will be locked up for a period of 3-5 years or longer.

Learning more about CDs
When you take your $5,000 or however much you would like to put into a CD, you are giving this money to the bank in exchange for a agreement that you will gain a large lump sum at the maturation date. The bank will then take this money and use it to re-invest in other things, allowing them to earn more money so they can afford to give you a favorable interest rate.

Opening a CD account
Almost every lender out there offers CD accounts. It's a great way to attract their existing customers to invest even more money into their organization. Before you choose a CD account with the lender that handles your checking account, look around to make sure you are getting the best terms available. Lenders are constantly running specials on CD accounts as they want to give you favorable interest rates in exchange for your money.

Interest rate
The interest rate on CD accounts are normally fixed. Depending upon the lender you work with, the interest rate will generally be anywhere from 0.60% up to about 4.0%. Lenders that you currently have accounts with may offer higher interest rate and they will classify their CD system as silver or gold. Gold CD accounts are usually held for their current account holders that deposit at least $5,000 or more into a CD.

The Maturation date
An important part of the CD is understanding what is meant by the maturation date. When you open a CD, you will be paid interest and you have a short window of time to decide what you would like to do with this money. As it's not going to be a lot of money, most investors choose to reinvest the money into the CD. The lenders usually use this option as the fallback method unless they hear something different from you. Generally you have about 10 days to decide what you would like to do with the money before the bank will reinvest it for you.

How do I find the best CD account?
Shopping around is going to be the best way to find a good interest rate for your CD account, but you need to pay close attention to the maturation date. Setting a high fixed interest rate will guarantee you that you will make a decent return, which is a lot to say in a volatile market.

Where do I look for CD accounts?
As mentioned previously, you can check with your current lender to discuss their CD account options. Try to negotiate a fair agreement that will benefit both of you, not just your lender. A great place to look fro CD accounts is actually with online banking companies like ING Direct. They also offer additional investment options that provide you with higher interest rates over any checking or savings account. Talk to the lender about a CD investment strategy. You need to decide what you need this money for and how long you are willing to lock it up. They will be able to discuss a few different strategies that will allow you to reach your investment goals.