Certificates of Deposit make great investment options because they are safe and the interest rates are higher than many other types of accounts.
Investing in a CD is appropriate for any person who won’t need to withdraw their money right away and would like to take advantage of the higher interest rates than a checking or savings account interest rate would yield. Note that fully realizing the advantages of a CD account depends largely on how long the term of your investment will be.
Short-Term
Three- and six-month CDs are available, but keep in mind that interest is considered taxable income and you will pay taxes on whatever you make in that short time period. The longer your money remains invested, the higher the interest rate will be and tax costs won’t outweigh the profit.
To be sure you get real value out of your CD, commit to an investment of at least one year.
Long-Term
Most people can stand to have some of their money tied up for a year if it means a greater return in the future. CD options that span multiple years are available as well.
Consider also that as interest rates rise and fall, and the longer the term of your CD, the greater the possibility you will miss out on rising interest rates. Locking your money into a CD will prevent you from taking a loss as rates decline, but also from making a higher return as they rise.
When you turn to Mesa Banking Rates for comparisons of CD interest rates, consider the above before you decide on the length of your CD.
