Certificate of Deposit

Posts Tagged ‘mortgage’

Question: Certificate Of Deposit?

I just started looking at CD’s and was wondering how the APY works.

The one I’m looking at requires a minimum of $10,000 and if I were to choose a 60-Month CD Term, the APY is 3%.

Since APY is the Annual Percentage Yield, will I receive the 3% interest yearly, monthly, or only receive 3% for the entire 60-month term? If the answer is the ladder of question, the 60-month term, it doesn’t even sound worth it to me. Also since it’s a low-risk investment. :-/

I am looking at Chase banks CD’s

https://www.chase.com/ccp/index.jsp?pg_name=ccpmapp/individuals/cds/page/cds

There disclosure and terms are

https://apply.chase.com/oao/DisclosureRetriever.aspx?DI=aHR0cDovL2FwcGNvbnRlbnQuYmFua29uZS5uZXQvUlNJL0RlcG9zaXQvT0hfUlJfRU5HX1YyLmZkZg==

but I don’t really see anything about my question unless I missed something.

Answer: The short answer is that you should receive 3% of the balance per year for 5 years on whatever amount you decide to put into the CD.

Personally I wouldn’t be putting any money into a CD for longer than 3-6 months. The reason is because when you put your money into a CD, you are locking yourself into that interest rate for however long the CD is for, in this case 5 years. (unless you pay a penalty for withdrawing early) The problem with locking in interest rates now is that they are at historical lows, meaning that interest rates will likely rise in the near future as the economy improves. Also you won’t have your money available to you, unless you want to pay the penalty.

So a better solution would be to put your money into a high yield savings account. That way, the interest paid to you will increase as the market interest rates increase, and it will be easier to access those funds if necessary. Currently the rates on high yield savings/Money Market accounts don’t look like very attractive rates, but over the next five years, you will likely be much better off with the a high yield Money Market or savings account. Try websites like bankrate.com for help in finding one. I actually have an account with Capital One, and I have been pleased with it so far.

For more advice, please check out my blog, “Financial Advice for Men”: http://investmentlogics.blogspot.com

Compound Interest

Question: How do Certificate of Deposits (CD’s) actually work? And is it true they can help your credit?

I heard that taking out a CD and then getting a secure loan on one of them and paying it off will build my credit score….??? is that true and is that really how it works or was I told wrong? also, I have bad credit and im trying to fix it and build it up so if anyone has any suggestions I would love for you to share your opinions. thanks very much!

Answer: CD’s pay you a fixed amount of interest over a certain period of time. The time line can be anywhere from 6 months to 10 years or more. It really depends on the bank and the amount of the deposit. Generally larger deposits and longer time lines pay higher interest rates. Becareful though there is often fee’s for taking money out before the CD matures or going below a certain amount of money. If you are considering a CD your banker can tell you more about it. These are investments however and will not help you out credit wise. Some banks may use a CD as collateral for a secured loan, though generally secured loans have some other type collateral or cash up front that they require. Again a loan officer at a bank could best help you out with this.
Hope some of this helps.