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Advantages and Disadvantages of a Certificate of Deposit for Savings

Jenna Taubel

Jenna Taubel About The Author

Jun 26, 2017 8:00:00 AM

A great tool for earning interest on your money is a Certificate of Deposit (CD).  A CD is essentially an agreement between you and your credit union or bank where you promise to not withdraw any cash within a specific period of time, and in return the credit union or bank pays you a higher rate of interest on the money used to fund the CD.

The period in which you are not allowed to withdraw any cash varies depending on the terms of the CD. The terms can be as short as three months for shorter term goals, all the way up to five years for longer term investing goals. Generally speaking, the longer the terms of a CD, the higher the interest rate you'll get.

Though Certificate of Deposits are considered to be a solid tool for investing, they also have their own strengths and weaknesses that should be considered.  The following is a list of the advantages and disadvantages of a Certificate of Deposit to consider:

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With these advantages and disadvantages in mind, it is wise to consider that CD advantages usually outweigh the disadvantages. CDs allow you to grow your savings without hassle. You can easily compare different types of CDs with the help of online resources, and you can find one that best suits your needs.

Get a Certificate of Deposit at First Alliance Credit Union

Certificates of Deposit (CD) are useful for people looking for a way to save money while earning a relatively high interest. They not only help you save money, but they also let your money earn more interest with no additional effort on your part. 

If you'd like to put your money into a certificate of deposit, become a member of Fist Alliance Credit Union today and talk with one of our member experience advisors. They'll help you figure out the type of CD that best fits your financial needs. 

Want more information about certificates of deposit? Listen to episode 30 of our Good Money Moves podcast, which covers certificates of deposit in depth! 

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We do our best to provide helpful information but we cannot guarantee the accuracy or completeness of the information presented in the article, under no circumstance does the information provided constitute legal advice. You are responsible for independently verifying the information if you intend to use it in any way. Additionally, the content is not intended to be reflective of First Alliance Credit Union’s products or services, for accurate and complete details about our product and service information you must speak to an advisor at First Alliance Credit Union.