Introduction

Certificates of Deposit (CDs) can be a wise option if you want a high return on your deposit and won’t need your money during your CD’s term. When you open a CD, you deposit money into your account for a specific period, such as six months or five years. In exchange, your bank or credit union pays you interest—usually with higher yields than standard savings accounts.

How Much Are CDs Insured For?

As with other types of savings accounts, certificates of deposit are almost always insured by deposit insurance up to $250,000 per depositor, institution, and account type. If you open a CD through a bank, it will typically be insured by the Federal Deposit Insurance Corp. (FDIC). By contrast, if you open the account at a credit union, it will likely be insured by the National Credit Union Administration (NCUA).

What Happens if Your Bank or Credit Union Fails?

If your bank or credit union fails, it’s reassuring to know your money is covered up to $250,000 per depositor, per insured bank, per category at federally insured banks and credit unions. In such an event, the federal government acts swiftly to protect insured deposits, either by facilitating a sale to a financially sound bank or by issuing checks to depositors up to the insured balance in each account.

How to Maximize Your Deposit Insurance Coverage

While the $250,000 deposit insurance limit provides enough protection for most savers, it may be insufficient for those with more than $250,000 in savings. Fortunately, there are ways to maximize your insurance coverage.

• Single accounts: Savings accounts or checking accounts with one named owner
• Specific retirement accounts: 401(k)s and IRAs
• Joint accounts: Accounts owned by two or more individuals
• Revocable trust accounts
• Irrevocable trust accounts
• Employee benefit plan accounts
• Corporation/partnership/unincorporated association accounts
• Government accounts

How to Choose the Best CD

Before you open a CD account, it’s wise to compare multiple CDs and consider these essential factors:

• Type of CD: Understand how different types of CDs work and which type best suits your needs.
• Term length: CD terms vary from as short as one month to as long as 10 years. Consider your financial goals and needs to determine the best CD term for you.
• Interest rates: Find the best interest rate for your desired CD term by shopping and comparing rates at multiple banks and credit unions.
• Early withdrawal penalty: Consider the early withdrawal penalties charged by each bank if you withdraw money before the CD matures.
• Minimum deposit: Most CDs require a minimum deposit ranging from $500 to $2,500 to open an account, though some CDs have no minimum deposit requirements.
• Federal deposit insurance: Consider CDs from banks and credit unions that protect your money through FDIC and NCUA deposit insurance.

The Bottom Line

If you’ve already built up an adequate emergency fund and have extra money you don’t immediately need, adding CDs to your portfolio could make sense. Opening a CD from a federally insured financial institution protects your money up to each account’s limit. Also, the CD’s fixed rate provides a predictable return if you leave your money in your CD until it matures.

Deposit accounts like CDs can grow your money over time and are key components of your financial health. Your credit health is also essential, as strong credit improves your odds of qualifying for new credit with favorable interest rates. Experian offers numerous resources like free credit monitoring to help you build and maintain strong credit.

Contact O1ne Mortgage for Your Mortgage Service Needs

At O1ne Mortgage, we are dedicated to helping you achieve your financial goals. Whether you’re looking to invest in CDs or need assistance with mortgage services, our team of experts is here to guide you every step of the way. Call us today at 213-732-3074 for personalized mortgage service solutions.