When we invest our money, we want to be sure that our investment is both secure and profitable over a given period of time.  High-risk investments such as stock trading may yield considerable profit, but they also come with a high risk of substantial loss.  Low-risk approaches such as savings accounts are good for keeping money safe, but their interest rates are so low that profit accrual is virtually negligible.  At the intersection of these two investment methods is the Certificate of Deposit (CD), a time-sensitive financial deposit that combines the safety of a savings account with some of the money making benefits of higher-risk investment methods.  In this guide, our financial team here at American Bank & Trust has put together a list of CD benefits to show you why a CD may be a great choice for you.  Read on to learn more and then contact one of our bankers to start setting up your CD today!


How CDs Work

A CD works essentially the same way as a savings account, with one crucial difference.  With savings accounts, account owners can withdraw money whenever they please – with CDs, they cannot.  CDs are time sensitive accounts in which an account owner deposits a set amount of money to not be withdrawn for a stipulated amount of time.  This time period is called the term length and can range from several months up to 5 years.  The untouched money in a CD affords the lender greater security and freedom, which in turn leads them to incentivize CDs with greater interest rates than savings accounts.   Assuming no withdrawals are made, account owners will always walk away with significantly more money in their pockets once their term length has concluded.  You can learn more about them any benefits of CDs below.


The CD: No Risk – Guaranteed Returns

What makes the CD such an attractive option for those looking to invest their money safely is that it combines the security of a traditional savings account with some of the payoff of higher-risk investment methods.   Just like savings accounts from all federally-accredited institutions, CDs are fully insured by the federal government (FDIC). CDs are also guaranteed to make account owners money through competitive rates.  The interest rates themselves are dictated by a number of factors, including term length, amount of money deposited, the current market and interest rate environment and more.  Several of these factors can be chosen by you, the account owner, which makes the CD a versatile investment tool for budgets of virtually any size.  For instance, you could create a CD with a term length of 6 months and a deposit of $5,000 – or a CD with a term length of 5 years and a deposit of $100,000.  A typical CD will have a fixed rate of return during its term length, but there are several exceptions, including ‘bump’ CDs, ‘step up’ or ‘ladder’ CDs.  Talk to your local banker to learn more about which CD may be right for you.   Or you can visit the Certificate of Deposit page on our website.


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