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Five Things You should know about Certificate of Deposits (CDs)

Tropical Financial Credit Union
By Tropical Financial Credit Union - April 16, 2024

When deciding where to put your savings, consider opening a federally insured certificate of deposit, or CD. Most accounts have a fixed term and fixed rate, and they often pay more interest than a savings or money market account. Your original deposit, called the principal, is safe because you will receive all of that money when the CD matures, up to federal insurance limits. Tropical Financial offers CDs with a variety of terms and rates.  

The minimum deposit to open a CD can be small, as little as $500. The interest can accumulate in the account or be paid out on a regular basis such as quarterly or semi-annually. 

Unlike a savings account, your money is tied up in a CD. If you want to withdraw part or all of your funds before maturity, you should expect to pay a penalty that can include part of the principal. The amount can vary with the CD term, typically higher the longer the term. 

Which CD maturity is right for you? The answer depends largely on when you think you will need the money. Let’s say you plan to purchase an SUV in the next year. You want to make sure that the down payment keeps all of its dollar value because you will need every dollar when it is time to buy. You also want to have access to the funds when you find the right vehicle. Therefore, you would want a CD that matures in one year or less.

But let’s say you are saving for a new home and do not plan to move for a long while. Then, you would want to consider a term between two and five years. You will earn interest the entire time, and your principal and interest will be safe up to deposit insurance limits.


Here are five points to consider when deciding on whether to invest your money in a CD: 

  • CD yields typically increase with the length of the term. To increase your interest earnings, look for longer terms. However, compare the returns on maturities slightly shorter or slightly longer. You may find that they pay more. 
  • When interest rates are high, you can lock in those better returns with a CD. Even when rates go back down, your CD yield will stay the same until maturity.
  • Putting your money in a CD has advantages over savings and money market accounts. Their yields can change at any time. When interest rates fall, you can expect that your savings or money market account rate will fall, too, paying you less in interest.
  • CDs have no fees. Unlike some other investments, there are no charges based on your balance or earnings.
  • At Tropical Financial, your CD principal and interest are federally insured up to $250,000 per account by the National Credit Union Administration. 

To learn more about CDs at Tropical Financial, visit Tropicalfcu.com. 

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The content reflects the view of the author of the article and does not necessarily reflect the views of Tropical Financial Credit Union or its employees.
We do not guarantee the accuracy or completeness of the information presented in the article.