Boost Your Savings With a CD
If you don’t have a portion of your savings in a CD, you may be selling your earnings short. This article explains how to change that.
First, a quick look at savings accounts. Why are they popular? At a minimum, savings accounts do exactly what they promise: they save your money. Furthermore, savings accounts allow you to withdraw part or all of your money, any time you want, penalty-free. Meanwhile, your deposit continues earning interest with zero risk of losing value.
Sounds like a no-brainer, right? And for some of your savings, it’s the smartest choice. But for money you won’t need access to for a few months or more, a CD may be the more prudent, profitable option, especially in the medium to long term.
The higher the better
Compared with savings, a CD earns more money, due to its higher annual percentage yield (APY). In banking terms, APY measures the interest rate your CD earns each year. In human terms, the higher the APY, the more you get paid. Credit unions like CUTX generally offer a higher APY/interest rate for CDs than for savings. In return, when a customer opens a CD, he or she agrees not to withdraw from the account for a specified, fixed amount of time (a "term"). Term lengths at CUTX range from six months to 60 months, with plenty of options in between. When your CD reaches the end of its term, your funds (along with interest earned) become available to you to either reinvest into another CD or withdraw.