Pros and Cons of Opening a Certificate of Deposit

Have you been thinking about opening a  certificate of deposit at your local bank? If so, you might want to know about some of the pros and cons of taking one out. While it has many upsides to it, it also has its disadvantages like many things in life. While not perfect, it might be the tool for you to use in your quest to save money for now, or the future.

The upside to a CD is that you are going to be able to save your money without being tempted to take it out. The bank will keep your money for the set amount of time that you have selected, and you won’t be able to take the money out. This means that you won’t be tempted to take your money out at any time.

On the other hand, you won’t have your money for awhile, either. It means that you have to part with your money for a certain amount of time with no hopes of getting it back without some sort of penalty. This means that if you find a better way to invest your money, you have to be willing to let that go for the time being and just get what you are going to get.

You are going to know what you are getting out of your investment ahead of time. The banks will have rates listed and you will get that amount of return no matter what. While rates are low these days, you know that you are going to be getting into before you give your money away to the bank. This is an advantage because you don’t have any guaranteed returns with other forms of investments.

However, you cannot renegotiate the rates once you have bought the CD. If rates go up, you still have to wait until the end of the CD in order to put your money back into a higher yielding CD. This can be frustrating, but you should realize that a CD is really only to be used if you want to keep your money safe, as opposed to making a ton of money.

CD’s are something that you can use to keep your money safe while still gaining a little extra in the form of interest. There are certainly pros and cons to getting a CD, so you have to consider your own situation before investing into anything.