Certificate of Deposit
If you’d like your money to make you more money over a fixed period of time, a certificate of deposit may be the perfect solution. Read below to learn more about CDs and how to put more money in your pocket.
What is a certificate of deposit?
A certificate of deposit (CD) is the ultimate savings tool, allowing you to lock in a fixed interest rate for your money over a set timeframe known as a “term.” Once you cash in your CD, you receive the initial money you put forward plus interest earned. Investing in a CD offers security for your funds, no matter what happens in the market.
How does a certificate of deposit work?
CDs hold your money away from your regular funds, allowing it to grow untouched with interest over a fixed term. A certificate of deposit is typically available in a variety of lengths and interest rates. Typically, you place a certain amount of money into a separate account and leave it alone for an agreed to amount of time. After that time is up, you take it out and earn the interest! It’s that easy. Depending on your financial needs, different terms may be preferable to you.
Are CDs FDIC insured?
Absolutely! First Western is an FDIC-member bank, meaning each depositor is insured to at
least $250,000 by the FDIC. The FDIC is backed by the full faith and credit of the U.S.
Government. You have no reason to worry when you go with First Western.
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Can I withdraw early from my certificate of deposit?
Yes, you can, but early withdrawal can result in a penalty if the account is accessed before the maturity date, so it’s best to deposit what you expect to leave invested for the entire term.
First Western’s penalties for early withdrawal are 30-days interest on 3-month CD accounts, 90-days interest on 6-12-month certificate of deposit accounts, and 180-days interest on 15-48 month CDs. These fees can reduce earnings, so be thoughtful if you choose to withdraw early.
Once your term has matured, First Western offers a 10 day grace period, during which you can withdraw the funds penalty-free or decide to renew all or part of the funds for a new term. If no decision is made by the end of the grace period, then your term automatically renews to the same as the original term. A new interest rate is determined at the time of renewal. Maturity notices are sent by mail, 10-15 days prior to the maturity date.
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How does a CD differ from a regular savings account?
CDs and regular bank savings accounts both help you save money; however, they function very differently. It’s important to understand this before deciding where to place your funds.
A certificate of deposit is a way of setting aside your money in a separate untouchable account for a fixed term, which can range in length. Early withdrawals from the account, before the end of the term, may result in interest penalties which could reduce earnings. Typically deposits cannot be added to the initial deposit. Regular savings accounts allow for easier access to funds when needed and you can add to or withdraw from your savings account at any time, although withdrawal limitations may apply. Saving accounts are more suitable for everyday or emergency funds.
Certificates of deposit offer fixed interest rates while you leave your money untouched until the maturity date, upon which those funds are accessible to you. This fixed rate is a stress-free way to keep your money from being affected by market fluctuations.
CDs at First Western generally requires a minimum deposit of $1,000. Regular savings accounts typically have smaller minimum balance requirements.