When it comes to saving money, certificates of deposit (CDs) offer a reliable and often higher-yielding option compared to traditional savings accounts. At O1ne Mortgage, we understand the importance of making informed financial decisions, which is why we’re here to guide you through the various types of CDs available. Whether you’re looking for a safe place to park your savings or seeking higher returns, there’s a CD that can meet your needs. Call us at 213-732-3074 for personalized mortgage services and financial advice.

1. Traditional CDs

A traditional certificate of deposit is a standard CD account with a fixed-term maturity period, typically ranging from three months to five years or longer. In return for leaving your money in the account, the financial institution pays you interest, usually at a higher rate than a traditional savings account. The longer your CD term, the higher your yield. Traditional CDs are insured by the Federal Deposit Insurance Corp. (FDIC) for up to $250,000 per owner, making them a safe and reliable savings option.

2. No-Penalty CDs

No-penalty CDs, also known as liquid CDs, allow you to make withdrawals before your CD’s maturity date without triggering a penalty. While the annual percentage yield (APY) on a no-penalty CD usually lags behind that of a traditional one, these CDs are attractive to savers who want the flexibility to withdraw funds if needed. This feature is particularly useful if interest rates rise before your no-penalty CD matures, allowing you to move your funds to a CD with a higher yield.

3. Jumbo CDs

Jumbo CDs, also known as high-interest CDs, offer higher interest rates than traditional ones but require a much larger minimum deposit, typically at least $100,000. The most significant advantage of a jumbo CD is the higher interest rates due to the larger deposit, allowing you to earn more on your investment. However, be aware that jumbo CDs are insured by the FDIC up to $250,000 per account holder per bank, so large deposits over that amount may only be partially insured.

4. Bump-Up CDs

Bump-up CDs allow you to change your interest rate if the CD issuer raises the rate on the same term CD after yours is opened. This type of CD can help you take advantage of rising interest rates during your CD’s term. However, most CD issuers only allow you to exercise this option once, and bump-up CDs often offer lower rates than CDs that don’t feature a rate adjustment.

5. Step-Up CDs

Step-up CDs automatically increase your interest rate at scheduled intervals, such as every six months or annually. This type of CD can be a good option if you anticipate interest rates will rise during your CD’s term. However, the starting interest rate can be lower than a traditional CD, so if interest rates don’t rise, you could earn less over the term of your CD.

6. Brokered CDs

Brokered CDs are purchased through a broker or brokerage firm, not a bank or credit union. These CDs offer higher yields than standard CDs and the ability to hold multiple CDs in one brokerage account. However, brokered CDs carry a certain degree of risk, and your CD purchase might not be FDIC insured. Additionally, brokered CDs may be callable, meaning the issuing bank can end the CD before its maturity date.

7. IRA CDs

IRA CDs can be held within an individual retirement account (IRA) to receive higher interest rates and the tax advantages of an IRA. You can add new funds or roll over funds from an existing retirement plan. However, you should only open and contribute to an IRA CD if you’re confident you won’t need to access the funds until you retire, as making an early withdrawal could incur penalties and fees.

The Bottom Line

Deciding which CD is best for you depends on your unique financial situation and goals. CDs may benefit you if you have a significant amount of money you won’t need anytime soon. They offer higher earnings than a traditional savings account and come without the increased risks of stocks and bonds investing. Before you sign up for any CDs, ensure you understand the terms by which you can access account funds if needed. If you want higher earnings and the flexibility to access your money in a pinch, consider getting a high-yield savings account from an online bank.

For personalized mortgage services and financial advice, contact O1ne Mortgage at 213-732-3074. Our team of experts is here to help you make the best financial decisions for your future.