Before deciding whether or not to invest in a CD, consider your specific needs. Some of the reasons to consider a CD include:
- Your money is insured: The FDIC insures CDs up to $250,000. The federal government guarantees you will never lose your principal. For that reason, they have less risk than bonds, stocks, or other more volatile investments.
- Better rates than checking and savings: CDs usually offer higher interest rates than interest-bearing checking and savings accounts. They also offer higher interest rates than other safe investments, such as money-market accounts or money market funds.
- You can comparison shop: You can shop around for the best rates. Small banks will offer better rates because they need funds. Online-only banks will offer higher rates than brick and mortar banks because their costs are lower. In addition, you likely will find higher-than-usual rates if you deposit a sizable amount of cash in the form of jumbo CDs.