On one hand, certificates of deposit have benefits that make opening one absolutely worth it. You get an exponentially higher rate than a traditional savings account that is guaranteed to be stable for the term of the CD.

On the other hand, CDs have drawbacks that make people think they’re not worth it. The biggest drawback? You won’t be able to access your money until the CD matures, at least not without paying a penalty.

The real question, though, isn’t whether CDs are uniformly good or bad. Instead, you should be asking:

When are CDs worth it?

When you Have Extra Money

When you have some extra money lying in your savings account that you’re not going to miss, you could do worse than putting it into a CD. If you’ve gotten a windfall, for instance, and you’re not sure how to put that money to good use, you can open a short term CD account and let it earn additional interest while you decide what to do with it.

Open a certificate of deposit today!

When You’re Saving for a Financial Goal

If you’re saving money for a financial goal, you ideally won’t be using the funds you’ve saved until you have enough to achieve your goal. So why not put your money in a CD until have the money you need?

When you use a CD to store the money you’re saving for a financial goal, you get several advantages. Obviously, the higher interest rate will give you more money to put towards your goal, but you also won’t have to worry about being tempted to use your goal money for other things until the CD matures.

You can even use some CD strategies to maximize the return on your investment, such as:

• A barbell strategy to make sure you can take advantage of the best interest rates
• A bullet strategy that will give you large sum of money at the same time
• A CD ladder strategy that can help you get the higher interest rate of long-term CDs while still giving you regular access to your money

When You’ve Maxed out Your Emergency Fund

By this point, most people know the importance of putting aside money for an emergency fund, and that their goal should be to have six months of salary in their account. Once you achieve that goal, though, what do you do with the thousands of dollars just sitting in your savings account?

One of the best solutions is to put part of that money into a CD while still having $2,000 -- $3,000 in your savings account to take care of most financial emergencies. You’ll get the benefit of the higher interest rate, so when you do have to dip into your emergency fund you be able to build it back up faster, and you can use the CD ladder strategy to maximize the interest you’ll get while making sure you’ll be able to access the cash in your emergency fund if a serious emergency arises.

Got questions about certificates of deposit? Ask us!

Open a CD Account at First Alliance Credit Union

A CD account has several advantages and disadvantages, so you’ll need to know when opening one is worth it. Take advantage of what a CD has to offer by putting extra money in one, such as the money you get from a windfall. A CD is also an excellent choice to store the cash you’re saving for a financial goal, and it’s an ideal way to store part of your emergency fund.

If you’d like to see what a CD can do for you, become a member of First Alliance Credit Union today. A member advisor will be happy to help you open a CD account. You can also use Direct Deposit to put money into our traditional savings accounts until you have the minimum deposit requirement for a CD, and once you’ve opened the CD you can track its growth with our online banking platform and mobile app.