Among the safest investments available from banks and credit unions are Certificates of Deposit (CDs). The interest rates they pay are typically higher than savings accounts and money market accounts, but the drawback is that you have to lock in your money – although it’s possible to get out early.

You could say a CD is a “time deposit”. You promise to keep your cash in the bank for a pre-determined amount of time and in return, you receive a higher percentage return on these funds. The bank pays more for CDs because they know they can use your money for investments for longer-term investments, like loans. Terms can range in length from 6-60 months, and pay a variety of rates, depending on the length of term. When your CD “matures”, or comes to the end of the time of the investment, you have to decide what to do next. You have the option of renewing the CD, move the funds to your checking or savings account, or switch to a different CD with a longer or shorter term.

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