The Primary Advantages of CDs

If you are looking for a low risk way to grow your money, a certificate of deposit may be right for you. Many people are hesitant to tie up their money in the stock market or other savings products like bonds. A CD is considered a safer alternative as the funds are insured by the Federal Deposit Insurance Corporation (FDIC) up to the maximum amount allowed by law. Also, unlike stocks where it is possible to lose or gain large sums of money in a single day, funds put into a CD will continue to predictably grow.

When investing in the stock market or real estate market, the outcome is uncertain. Some years your gains may be high, while other years you may experience significant losses. When you invest in a CD, you can take advantage of fixed rates at fixed terms for the life of the product.

While many other types of savings accounts experience constant fluctuations, a CD will continue to accumulate slow and steady growth. There are also several types of CD products to consider, including:

• Fixed-Rate CDs: A fixed-rate CD has a set interest rate that is paid throughout the lifespan of the CD. With the type of CD, you are not affected by any interest rate increases or decreases
• Adjustable-Rate CD: An adjustable-rate CD has a set interest rate at the time of deposit. However, you have the option to adjust this rate throughout the CD’s term

Other Benefits to using CDs

Investing in a CD can make it possible to save up for many of life’s important events and occasions, from a child’s future education to a long sought-after vacation. A certificate of deposit account is a safe place to keep your money for a set period of time, allowing you to align your funds with your future goals. As CDs come with a variety of different maturity dates, you can set the withdrawal date to the time that you need your money, whether it is six months from now or two years.

One of the biggest advantages of a certificate of deposit are the low or potentially no fees associated with the savings account. Many banks do not charge a fee to hold your money in a CD, making the account a smart and affordable way to save. This also means that there are no fees to negatively impact your earnings. However, this is not true with all types of CDs. Carefully read the agreement at the time you sign your account contract. Some banks do charge a small monthly fee. If you are not sure if your bank does this, be sure to ask before signing any documents.

Are There Penalties for Using CDs?

While a certificate of deposit is fairly low risk, there are penalties that come with early withdrawals. Penalties occur when you choose to withdraw your money from a CD before the maturity date on the account has been reached. While penalty fees can range from bank to bank, most penalty fees for a CD with a maturity of one year or less is equivalent to three months’ worth of interest. For CDs with a maturity date of one year or more, the average withdrawal penalty is equivalent to six months’ worth of interest. To avoid these penalties, it is wise not to withdraw your funds until the maturity date has been reached.

Learn More About How To Open A CD

A certificate of deposit is a safe investment, but like most types of savings accounts, it does have some downfalls. If you do not believe that you will need the sum of money for the unforeseen future, a CD can be an effective way to gain interest on your money that is merely sitting in the bank. However, be aware that withdrawing your money early could leave you with less interest than you had originally planned. To learn more about CDs, contact FVCbank to speak with a knowledgeable banker.

The post Certificate of Deposit (CD) Advantages and Drawbacks appeared first on FVCbank.

Why Invest in a CD

Certificates of deposit are considered a safe place to hold assets. Similar to a savings account, a CD earns interest over a set period of time. However, CDs typically yield returns that are far greater than standard savings accounts due to higher interest rates. While interest rates vary from institution to institution, most are near the current rate of inflation. In 2018, CD interest rates are expected to gradually increase.

When shopping for certificates of deposit, it is important to compare the different types of CDs and interest rates. It is also essential to understand the difference between annual percentage rate (APR) and annual percentage yield (APY). APR is the amount of interest earned in the course of one year, without accounting for compounding. Compounding is the timing of interest calculation or payment. On the other hand, APY is the amount of total interest that a CD will earn in the course of a year with compound interest.

Benefits of a CD Account

If you are in search of a secure way to grow your money, a CD account may be the right option. Deposit accounts have a set term, typically ranging from three months to 10 years. During this time, interest continues to grow. When you withdraw your funds on the withdrawal date, you can withdraw your original funds and any accumulated interest. With a fixed-rate CD, there is a set interest rate that is paid throughout the life of the CD. With a variable-rate CD, a percentage is typically paid based on the difference between the interest rates at the start and end of the CD’s terms. With an adjustable-rate CD, the interest rate at deposit can be adjusted during the term.

Many new investors are apprehensive about tying up their money in bonds or the stock market. One of the biggest benefits of a CD account is there is no real risk. As the FDIC insures CDs up to the maximum amount allowed by law, your funds remain secure while in the account. To be safe, always confirm with your bank or credit union that the CD you have chosen is indeed insured by the FDIC.

Another benefit of a CD account is there vast versatility. As certificates of deposit come with different maturity dates, you can choose a withdrawal that best suits your needs, lifestyle, and goals. Maybe you are planning a major vacation and want to save as much as possible for the special getaway. Or perhaps you have a child entering college in a few years and want to invest in his future. No matter the reason for your investment, having the ability to choose a favorable maturity date while keeping your funds in a safe place can be highly beneficial for investors of all ages.

Finding the Best CD Rates

Finding the best CD interest rates require a little time as you shop around for products that meet your needs. If you are new to CDs, consider a short-term account, such as a 1-year CD. Avoid CDs that are set to mature in less than one year as most pay an interest rate that is similar to a good savings account rate. If you are not sure if you will need the funds in the future, it is also wise to avoid multi-year maturity dates. To learn how you can find the best rates at your local Virginia community bank or to open a business checking account, contact FVCbank today.

The post Is My Money Safe in a Certificate Of Deposit? appeared first on FVCbank.

How Do CDARS Work?

CDARS is comprised of a network of financial institutions. When you place a deposit with a network member, the institution uses the program to place your funds into CDs that are issued by other members of the network. Your funds are then spread across several banks to ensure that both the principal and interest are eligible for FDIC insurance. This means that even though you are working with just one bank, you are still receiving coverage from many institutions. Along with working with a bank you trust, you will receive just one consolidated account statement regularly.

Getting started with the CDARS program is simple. First, you visit your local FVCbank branch where you will be asked to sign a CDARS Deposit Placement Agreement, as well as a custodial agreement. You can then invest funds with a member of the CDARS network. Your money is placed using the program and your CDs are issued by members of the program’s network. Shortly after, you will receive confirmation of your CDs from your financial institution. FVCbank will also provide you with regular consolidated interest payments and statements.

While your CDs may be from financial institutions all over the country, your funds can still be used locally. This is because CDARS network members swap deposits on a dollar-for-dollar basis, ensuring that the same amount of funds that are placed through the network are returned to your financial institution. This means that your original deposit amount is able to remain in your financial institution and be used by you locally.

How Does CDARS Benefit Businesses?

There are multiple reasons why businesses choose to invest funds in the CDARS program. One of the biggest benefits is the ability to combine the convenience of working with just one bank with the security of having access to FDIC insurance exceeding $250,000. With the program, investors have access to millions of dollars in FDIC insurance on low-risk CD investments. Each CD investment contains one interest rate per maturity which can be negotiated at the time of deposit. There are also no hidden fees including annual fees, transaction fees, or subscription fees. The rate you agreed on is the rate you will receive.

The program also comes with other benefits, such as no ongoing collateralization. As CDARS deposits are eligible for FDIC protection, it may not be necessary to collateralize your deposits. This eliminates the need to routinely track changing collateral values. In addition, you have ample control over your investment. Just like standard CDs, your CDs in the CDARS program come with a range of maturities. Select from maturities ranging from one month up to five years. Choose the terms that best fit your unique investment needs and short-term and long-term goals.

CDARS is one of the safest options for investors who want to protect their investments while continuing to earn interest rates only possible with CDs. Investing in the program can be a wise alternative to U.S. Treasuries, and like Treasuries, CDARS is backed by the U.S. government. You may be worried about how the FDIC feels about such programs. Fortunately, the FDIC not only acknowledges the deposit placement service but has even encouraged it at times. The CDARS program has been thoroughly tested and the service is recognized by both FDIC regulations as well as in state statutes.

Want to Learn More?

The CDARS program can be a valuable cash management tool for your business for both short-term and long-term investments. The one-stop shopping resource allows you to keep your money safe and secure with FDIC coverage, while still having access to CD investment amounts over the specified limit.

The program is also one of the most convenient, allowing you to work with a bank that you trust as you earn a negotiated interest rate and receive a single regular statement from your bank. Another unknown perk is that your money helps support lending opportunities in your local community. With the CDARS program, you no longer have to waste time managing multiple relationships with banks. For more information about the CDARS program or to open a business checking account, contact FVCbank today.

The post All You Need To Know About CDARS appeared first on FVCbank.

How CDs Work

How exactly do CD accounts work? A certificate of deposit allows your savings to grow at a more rapid rate than they would in a traditional savings account. However, similar to a savings account, you make an initial deposit. In exchange for depositing funds into the bank for a fixed period of time, the bank pays a fixed interest rate. Over the course of the term, the interest in your CD account builds. When the CD matures, you receive the money you deposited, plus any interest that has accrued.

As a general rule of thumb, the longer the term of the CD, the higher the interest rate. By depositing a higher amount of money into your account, you can reap a higher annual percentage yield. Depending on the amount of money you would like to deposit, you may want to consider other types of CDs, such as jumbo CDs which have a high minimum balance requirement. It is important to understand that unlike a traditional savings account, you cannot withdraw the funds without facing stiff penalties. Before opening a CD, be sure that you have an adequate emergency fund available.

CD Interest Rates

Annual percentage rate (APR) is a term used to describe a CD’s annual interest rate, not including compounded interest. For example, if a CD offers 5 percent interest, you would earn $1,000 on a $20,000 CD. As most CDs pay compound interest, the annual percentage yield (APY) describes the accrued interest. When comparing interest rates between CDs, be sure to find a product that offers a competitive rate to ensure a more favorable outcome.

Getting a Certificate of Deposit

Certificates of deposit may be right for investors who have an initial deposit saved up and who does not need these funds due to having a separate emergency fund available. Depending on the bank or credit union, you may be required to meet a minimum deposit, typically $500 or $1,000. Know that when you deposit this money into a CD account, it will be locked down until the end of the chosen term. Withdrawing the funds before the maturity date means paying a penalty that often adds up to six months’ worth of accrued interest. To prevent a withdrawal from occurring, it is ideal to have at least three to six months’ worth of living expenses in a savings account.

Using a CD

Starting a certificate of deposit is easy. Simply contact your bank or credit union and tell them you would like to make a deposit into a CD. Some institutions allow you to make investments online, while others can walk you through the process with a customer service representative over the phone. The representative will ask how much you would like to invest and offer an array of CD products. Once money has been deposited into an account, you will begin receiving statements just like you would an ordinary savings account.

Benefits of a CD

If you have funds socked away in a savings or checking account, know they could be more beneficial in a CD account. A CD is a safe way to grow your money with minimal risk. With their fixed rates and terms, you can lock in a favorable interest rate for the life of the product resulting in a predictable outcome. You also have the benefit of knowing your investment is safe. Certificates of deposit are very secure as they are insured up to $250,000. This means that even if your bank or credit union goes bankrupt, you can rest easy knowing your money is safe.

Contact a Virginia Community Bank

As a business owner, you are always looking for the best way to invest your hard earned money. Many savvy business owners would agree that a certificate of deposit is a smart way to earn interest on money that is already sitting in the bank. Certificates of deposit are among the safest investment opportunities out there, and with no monthly fees to pay, there is little reason not to open an account. For more information about a certificate of deposit account or to open a business checking account, contact a service representative at your local Virginia community bank.

The post How Does a Certificate of Deposit Work? appeared first on FVCbank.

1. Low Starting Deposits

Much like a savings account, a CD allows you to deposit money into an account which then earns interest over time. To open a CD, you will need to contribute a minimum opening deposit. Depending on the institution you choose, this amount can range from $50 for standard CDs up to $100,000 for jumbo CDs. However, the average deposit amount is between $500 and $1,000. The ability to contribute a lower starting deposit can be beneficial for investors who wish to start small and grow their savings over time.

2. Flexible Rates and Terms

Other investment opportunities like real estate and the stock market can be unpredictable. A CD investment allows for a safer savings plan as the outcome is much more predictable. With a CD, you can lock in a fixed interest rate for the life of the product, allowing you to better measure the growth of the account. CDs offer slow and steady interest growth. CDs also come with various maturity dates that allow you to align your withdrawal date with your financial goals.

3. Choice of Interest Rates

When it comes to a CD investment, you have several excellent options to consider. A fixed-rate CD is one of the most popular as it has a set interest rate that is paid through the life of the CD. A variable-rate CD pays a percentage based on the difference between the interest rates at the start and end of the term. You may also choose an adjustable-rate CD which has a set interest rate at the time of your deposit but with the option to “adjust” the rate during the CD’s term.

4. Better Returns

A CD investment typically comes with better returns that you would possibly acquire with a traditional savings account. This is because unlike a regular savings account in which you can withdraw your money at any time, a CD account requires you to keep your funds in the bank for a set amount of time. As banks see a CD investment as a more valuable investment option, they often pay investors a higher yield. How much interest you could potentially earn will depend on a variety of factors, such as your unique terms and rates.

5. Funds Remain Safe

Much like cash in a traditional savings account, any funds that you deposit into a CD account remain safe. However, to be sure, check that your deposits are FDIC-insured if you are using a bank, or covered under NCUA insurance if you use a credit union. These insurances provide a government guarantee that you will receive all of your money back if the bank or credit union suddenly goes belly-up. As far as savings accounts, a CD investment is fairly low-risk. As you get to choose the terms and maturity date for your CD investment, you have even more control over your finances.

6. Useful Account Features

If you are a business owner or entrepreneur, you may discover a range of useful account features which make a CD investment a good choice for your company. One of the biggest benefits of a CD account is the high interest rates offered with interest that is compounded daily. You may also enjoy other great account features, such as free electronic transfer of interest, auto-renewal with grace period, and terms that range from several months to years. Businesses can also take advantage of a CD guaranteed return on investments.

Get Started With a CD Investment Today

A certificate of deposit is a valuable tool for building interest from your money. It is essentially a contract with your bank or credit union in which you promise not to withdraw funds from the account within a set time period. In return, the bank or credit union pays out a higher interest rate which you can withdraw on the account’s maturity date. As a general rule of thumb, the longer the terms of the CD, the higher the interest rate will be. For more information about the benefits of a CD account, or to open a business or personal checking account, contact FVCbank.

The post Top 6 Benefits of a CD Investment appeared first on FVCbank.