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Why are Certificates of Deposit Becoming So Popular?

Authored By: Genisys Credit Union on 2/8/2023

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After a year of surging prices, members are still grappling with the effects of rising inflation. Add in the rocky performance of Wall Street, and people are looking for a silver lining. One such opportunity is beginning to shine as savings rates also start to climb – it’s called a certificate of deposit (CD). 

Certificates of deposit, also known as share certificate accounts among many credit unions, are investment accounts that yield higher returns than traditional savings accounts. They offer a spectrum of financial perks with very little downside. Keep reading to find out if adding a CD to your savings plan is right for you.

What is a Certificate of Deposit?

Most credit unions and banks offer three primary savings and investment accounts: 

Among the three, certificates of deposit generally offer the greatest yields. However, there is a tradeoff in exchange for earning higher dividends. With a CD, your money is locked in, meaning you cannot access or withdraw your funds (without incurring a penalty). While this account characteristic might seem like a drawback, it’s often a blessing in disguise because it forces you to save money.

How Does a Certificate of Deposit Work?

Because your money is locked in for a designated period, CDs are broken up into varying terms. Take a look at our current rates for a better idea.

Characteristics of CDs:

Advantages of Certificates of Deposit:

Drawbacks of Certificates of Deposit:

Wise Ways to Use Certificates of Deposit:

CDs are versatile investment accounts that can earn a good return with no risk. While the higher dividends are nice, it’s the fact that your money is locked in that helps so many members. By being forced to save, you’re more likely to achieve your financial goals.

Here are several strategies for using certificates of deposit to your advantage:

Diversify Investments: A well-diversified investment portfolio is a winning strategy for any investor. Adding CDs to your portfolio during a rising rate environment will yield strong dividends without the market risk.

Conservative Investments: If you’re nearing retirement, it might be time to tone down your risk tolerance and move toward a more conservative investing approach. CDs will yield favorable dividends without unnecessary market risk.

First-Time Investments: CDs are a great first step if you’re ready to start investing but don’t have the stomach for potential market losses just yet. They teach you not to touch your money for extended periods and let it grow through compound interest.

Mid-Range Financial Goals (1 to 5 Years): Because your funds are locked in, CDs are the perfect way to save for future financial goals, such a down payment or closing costs on a new home, a college fund for your child or a dream vacation for your family

While no one enjoys periods of high inflation, there are opportunities in everything. Right now, yields are climbing higher, and certificates of deposit are making a strong comeback. These popular accounts might be the perfect tool to help boost your investment returns without added risk.

If you want to learn more about certificates of deposit or are ready to open an account, we’re here to help. Please stop by any of our convenient branch locations or give us a call at 248-322-9800 extension 5.




 

© Genisys Credit Union and www.genisyscu.org, 2023. Unauthorized use and/or duplication of this material without express and written permission from this site’s author and/or owner is strictly prohibited.  Excerpts and links may be used, provided that full and clear credit is given to Genisys Credit Union and www.genisyscu.org with appropriate and specific direction to the original content.



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