All you should know about online Certificates of Deposit

 If you have a certain amount of money you want to invest with minimal risk, you can consider several options. First of all, you can invest it in real estate, stock, bonds, etc. But investing in shares and other security papers is unsafe, especially now, when they can lose their value any minute. Real estate is more stable investment, but you may not have enough funds to buy a house or an apartment.

In this case there is an alternative option for you. A certificate of deposit, often referred to as CD, is a special low-risk time deposit that offers higher interest rates than a savings account. A certificate of deposit typically has a pre-set fixed term (from three months to five years) and a maturity date. Unlike many other investments, the money is insured by the FDIC for banks and by the NCUA for credit unions. 

A certificate of deposit typically has a fixed interest rate and APY. A longer term of a CD can increase your profit. Nowadays the average annual percentage yield for a 6 month CD is 1.76%, 1 year CD is 2.32%, 5 year CD is 3.01%. You can take advantage of numerous online calculators to evaluate how much money you can earn. 

Certificates of deposit restrict users from withdrawing money on demand. You will need to hold you CD until the maturity day. Then you can withdraw the funds you invested together with accrued interest. 

If you withdraw the money before the maturity date, you will need to pay a penalty. For a five-year CD, this is often the loss of 6 months' interest. That’s why it is better to avoid withdrawing money until the maturity date unless you need money urgently. 

There is a popular CD strategy that will let you stagger maturity dates on your account. Thus you can avoid financial losses due to early withdrawal penalty in the event you need your funds before your maturity date. 

This strategy is known as CD laddering. You select the financial institution which offers the most beneficial features and open several accounts with different terms. Once each matures, simply roll it over into a new one. The main benefit of this strategy is that if you must withdraw one account, the others will continue accumulating interest without being disturbed.

As a rule, certificates of deposit require minimum deposits. It can be as low as $10 and as high as $100,000. You can get higher rates for larger deposits. CDs of less than $100,000 are called "small CDs"; CDs for more than $100,000 are called "jumbo CDs". Typically, the more money you invest, the higher APY you can get. Nowadays an APY for jumbo CDs varies from 1% to 2.67%.

Opening a CD account online doesn’t differ from doing so over the phone or in person. You will need your Social Security number, driver's license number, and banking information for the institution you want to transfer money from to fund your CD account. 

After you assemble this information, do a careful research on prospective financial institutions. You can browse websites like Bankrate or Bankaholic to compare rates from several companies or visit official websites of banks (GMAC Bank, HSBC Direct, BankDirect, Countrywide Bank, FSB, etc.) There are basically five questions to take into consideration:

•    Is the APY competitive? 
•    What are penalties for early withdrawal?
•    Is the bank FDIC-insured? 
•    When does the CD mature?
•    Can interest rates change?

When you find the institution for you, click "Open an Account" button. You will need to choose your account type, fill out personal information, select how you'll fund the account (mailing in a check, setting up an electronic transfer from your bank, etc.) and verify your identity.