Saturday, May 1, 2010

Purchasing certificate of deposit

Purchasing certificate of deposit (CDs) is smart investments for anyone. Since you have agreed to leave your money in the CD for certain period of time, the bank pays a higher rate of interest than it would for regular savings accounts but there's a penalty if you withdraw the money before maturity dates. The maturity simply refers to the amount of time that your money gets tied up in the investment. Common maturity dates of CDs are one month, three months, one year, three years, and five years. The longer you tie up your money, the higher the rate.

It is important to remember that terms, fees, and interest rates vary among financial institutions, so always compare CD rates before purchasing CD to get highest the rate. After the CD is purchased, the individual waits until it matures, at which time he or she is repaid the original amount plus interest that the CD has earned over that time.

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