It could stand for Compact Disc. Celine Dion. Or Civil Defense. But when it comes to saving money, the CD you need is a Certificate of Deposit. A CD is like a savings account, but with a few key differences:
Choice of fixed terms
Unlike a savings account, a CD has a fixed term - usually 3 months or 6 months, or 1 to 5 years. This means your CD will earn interest for a specific period of time. You’ll have the security of knowing the interest rate you’ll earn for the life of your CD. However, you have to leave your money in the CD for the entire term. Generally, you can’t just withdraw money whenever you want to without paying a penalty.
Higher interest than a savings account
This is the big advantage of CDs. Typically, the longer a CD’s term, the higher the interest rate can be. It’s sort of like your reward for not touching your money until your CD matures.
Flexible bump-up rate option
If you’re thinking that overall interest rates could rise, you may be discouraged from opening a CD with a fixed rate for a fixed term. So it’s important to know that there are options like our 3-year Bump-up CD that allows you to increase your interest rate one time during the 3-year term if rates go up.
At the end of your CD’s term, you’ll be notified that your CD is about to “mature.” You’ll then have a window of time – usually around 10 days - to decide what you want to do with your CD investment and the interest you’ve earned.
For example, you can withdraw it, reinvest it and start earning interest on your interest (compounding), or do nothing- in which case your money will be automatically reinvested in another CD and you won’t be able to touch it again until the term ends.
How to get a CD
You can “buy” a CD at your bank. There may be a form to fill out and a minimum investment requirement. In some cases, the more you invest the higher the interest rate might be.
Some banks offer higher rates if you are a customer or have another account with them. Be sure to shop around for the best CD deals. They’re often advertised in newspapers or on bank posters.
At Webster, you can choose a CD with terms from one month to 5 years. We also offer a NEW 3-year Bump-up CD. With all of our CDs, your interest earned is compounded and credited monthly. You can choose to leave the interest in your CD account to continue compounding, transfer it to another account or receive an interest check.
When you open Webster’s new 3-year Bump-up CD, you can “bump” your rate up one time during its term if rates rise.
For more information about visit any of our banking centers, call (800) 995-9995, or chat with an agent online. Or if you'd like one of our social media specialists to help, just send us an email at firstname.lastname@example.org. Let us know any questions you have about CD's in the comments below.