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How to Open a CD (Certificate of Deposit) Account

It is quite easy to open a certificate of deposit account and there are ways to benefit from it as well. The more obvious is looking at the interest rate offers from banks and financial institutions. This factor alone can make a difference in investing in your CD account.

A certificate of deposit account generally thrives in favorable conditions that are offered by 2 important factors: time and interest rate. There is no point in investing in a CD account if the interest rates are low and if you don’t intend to keep your money for a long period of time in a bank. Time is really crucial for your money to grow.

The interest rates vary from every bank. If you scout for banks, you need to ask about their interest rate offers and the terms. Normally, you can profit more from a CD account rather than from a regular savings account.

If you look further into your options, you will find that there are banks and financial institutions that offer better interest rates than others. You need to understand that not because you invest your money longer, it will profit higher. If you really want to benefit from opening certificate of deposit accounts, remind yourself that timing is a factor, but the ever changing interest rates also need to be considered.

A Step-by-Step Guide to Opening a Certificate Of Deposit Account
1. Scout for the rates and terms.
As mentioned earlier, interest rates vary from bank to bank, and the terms also change over time and are dependent on the offer of each bank.

Ask the banks that you are scouting for to give you better offers. You can always request from the bank to give you information about the available rates.

2. Decide on the tenure.
The term of CD investment will be dependent on your decision. If you choose a longer term, ensure that you will not be withdrawing the funds prior to the expiration of your CD’s term. Premature withdrawal of your funds will incur penalties.

You can choose from 3 months to 48 months tenure. Some clients prefer longer terms and extend their CD’s tenure by telling the bank to do so.

3. Decide on the interest rate.
If you have done step 1, it will be easier for you to decide on the interest rate that you want your CD account to be locked in. Remember that when you finalize on the term and the interest rate, it will be applied throughout the entire term.

A tip to benefit from opening a certificate of deposit accounts is to be decisive on this step. If you think that the interest rates will increase on the coming year, you should shorten your CD’s term to be able to get the next best rate without being charged with penalties.

4. Go to the bank upon appointment to deposit your money.
It is important that you go to the bank by appointment so you can discuss and ask everything you need to know before signing on to the documents.

This step is crucial as it is the finalization of your decision to invest and open a certificate of deposit account. You need to go over the details of your CD with the help of the bank representative. The transaction details, penalties and interest paid should be the highlights of the discussion.

5. Sign and deposit your money into your CD account.
The bank will send you updates regarding your CD. They will also send you notifications before the end of your term.

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