Is a CD safe? – CBS News

Given the economy, interest rates and all the uncertainty around today risk of recessionYou are looking for some extra security when it comes to your money.

Fortunately, there are plenty of options for keeping your money safe — including Certificate of Deposit (CD). A CD is a type of account where you deposit a sum of money given time In return a Fixed amount of interest. During that time, you can’t access your money (without incurring a penalty) but you get a full interest guarantee at the end of the CD tenure.

with Today’s high interest rates, CDs can even earn upwards of a 5% annual percentage yield (APY) depending on the bank and term you choose. But CDs aren’t just profitable—they’re also incredibly secure. Here’s what you need to know about how you can keep your money safe in CDs right now.

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Is a CD safe?

Here are a few reasons why CDs are the safest place to keep your money

FDIC Insurance

When you open a CD, make sure the bank you use is insured by the Federal Deposit Insurance Corporation. This is the insurance that guarantees your money against bank failure like earlier this year The collapse of Silicon Valley Bank.

FDIC insurance protects money held in your qualified deposit accounts, including CDs Savings Account and checking accounts. Insurance covers up to $250,000 per depositor, per bank and per account type. If you have more than that amount in savings, for example, you can put $250,000 in a CD at one bank and $250,000 in a CD at another bank and still be protected (as long as they’re not in the same account type at the same bank).

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Fixed interest rate

Since CDs have fixed interest rates that stay the same throughout the account term, you’re pretty much guaranteed a return that you can calculate in advance.

For example, say you open a 12-month CD today with an $8,000 deposit and a 5% APY. When the CD matures in one year, you will not only receive your initial deposit, but you will also earn $400 in interest for a total of $8,400.

Of course, there are ways Lose that return. If you withdraw your money from the account before the expiry date, you will not only lose the interest you would have earned in the future but you may also be charged a withdrawal penalty. These penalties are usually a percentage of the interest earned.

There is no market volatility

You invest for long-term goals compared to money retirementCD is relatively stable.

The stock market offers the opportunity to grow your investments by a large margin over time — in exchange for volatile swings both up and down. But CDs are much safer because the interest rate you agree to in advance is the rate you’ll earn at maturity.

Fluctuations may occur for long-term investors. For example, say you opened a five-year CD in 2018 that is now expiring and you decide to roll it into a new CD. You will probably find out interest rate very different from The Fed’s federal funds target range That year only ran between 1.50% and 2.50%. But that difference is far less than the day-to-day volatility in some other markets — and why CDs can be better for savings goals with fixed timeframes that you can use term CDs to meet.

Bottom line

If you’re looking for a safe place to keep your money in 2023, a CD is one of the best options. CDs earn a fixed interest rate over a period of time, so you know exactly how much money you can expect when you open the account. And with no exposure to risky markets — as well as FDIC insurance protection — you can be sure your money is safe while interest accrues.

Learn more about the best CD rates you can qualify for right now.