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6 Reasons a Certificate of Deposit Could Be Good for Your Finances

Certificates of Deposit (CDs) are a strong strategy for upping your savings game. When you open this type of account with your credit union, you can make deposits whenever you want. But the big difference between CDs and standard savings or checking accounts comes with the withdrawal period. 

CDs have a set term until you reach a maturity date, where you can’t withdraw money without paying a penalty. This time could be anywhere between 3 and 60 months. That might sound kind of strange, but the benefits come in strong for savings. Here are a few reasons that CDs might be a good financial move for you.

Certificate of Deposit

Higher dividend rates

CDs typically have higher dividend or interest rates than normal savings accounts. That’s because your financial institution has more of a guarantee that your money will stay in that account until the account maturity date, so they can earn more through investments. And credit unions pass on profits to account holders via those higher dividend rates. CD rates might be anywhere between 3 and 4% APY, compared to 0.01 to 0.25% for standard savings accounts. 


No (or low) fees 

Some types of investment and savings accounts charge a monthly maintenance fee. With a CD, if you don’t withdraw any money before the term is up, you usually don’t have to pay any fees. That means more money stays in your savings instead of you paying to save. 



Lower spending temptation 

Because CDs have a set time limit for how long your funds have to stay in the account before you can withdraw without a fee, there’s a psychological barrier to taking money out early. If you’re the type of person who is tempted to spend money just because it’s in your account, don’t worry: that’s normal. CDs can help temper that temptation by disincentivizing withdrawals. 


Saving incentives 

Because of the higher dividend rates, CDs also give a powerful incentive to keep making deposits. You know that you’ll earn more over time the more you put into that account, so it feels good to transfer more money each month. 


Top Security 

Banks and credit unions offer CDs, so they have the same insurance protections as checking and savings accounts. Your money is safe against the ebbs and flows of the economy. It’s also protected from hackers and security breaches, both through encryption and insurance. You don’t need to worry about the safety of your money when it’s deposited into a CD. 



A guaranteed return 

Other types of long-term savings involve making stock market investments. And while that can yield high returns, it’s also subject to more risk. If the stock market crashes, you have a chance of losing money. That’s not the case with a CD. The dividend rate you’re quoted when you open the account is the return you’ll get if you don’t make any withdrawals before the account’s maturity date. It’s that simple. 

When you’re ready to watch your savings grow in a certificate of deposit, open your account with Rocky Mountain Credit Union. With a range of CDs available, find the one that meets your financial needs. Apply to see if you qualify, and start saving. 

Non RMCU links are being provided as a convenience and for informational purposes only; they do not constitute an endorsement or an approval by Rocky Mountain Credit Union of any of the products, services or opinions of the corporation or organization or individual. RMCU bears no responsibility for the accuracy, legality, or content of the external sites.

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