| Certificates of Deposit (CDs) are a popular form of | | | | Bank 1: Any partial withdrawal before the maturity |
| financial investment these days because they are | | | | date of the CD results in a 3 month, 6-month or 1 |
| considered to be more safe than many other types | | | | year penalty, depending upon the term of the CD (12 |
| of savings and investments. This information is | | | | month to 5-years). The penalty: your interest |
| important for you to consider for your financial | | | | earnings on the entire $20k CD for the 3, 6, or 12 |
| safety and wealth. It’s also important for you to | | | | months penalty period are taken away, for taking |
| ask questions of the bank. Disclaimer: This info and | | | | out any principal amount, even $1,000 or whatever |
| the tips are not intended to be comprehensive...that | | | | small amount. That’s a huge loss. |
| would take a book. | | | | Bank 2: Partial withdrawals (may be a limit to 1 or 2) |
| What You Should Know | | | | are allowed, with a penalty for the early withdrawal. |
| 1. CDs at banks are insured up to $250,000 by the | | | | Penalty: of 3 or 6 months only on the partial amount |
| FDIC government agency. | | | | withdrawn. The rest continues to earn interest until |
| Know that the government has a very small | | | | the CD matures, and at the rate in the original CD |
| percentage placed in reserve to fund these losses. | | | | document. Nice.c. Most banks will automatically roll |
| The government reserve fund was only 1 to 2% of | | | | over the CD to another like-term CD if you do not |
| the total dollars invested in CDs, last time I checked. | | | | redeem it within 10 days or so after it matures. You |
| And it’s likely no more than that these days. | | | | should get a notice in the mail a week or two before |
| Other agencies like brokerage houses, may be | | | | the maturity date, but don’t rely on that. Keep |
| insured in other ways, like SIPC, and there are others | | | | track of maturity dates yourself to insure you know |
| too. | | | | what’s going on. |
| Policy: Make sure you limit your investment in each | | | | 4. Ask questions and make requests of the bank in |
| bank to maximum of $250,000, to have the best | | | | situations where errors or misunderstandings occur |
| protection. Verify if the $250,000 is per person or | | | | with CDs or other bank transactions.a. When a CD |
| per member. | | | | has automatically rolled over in error or even if you |
| 2. CDs offer many choices for your investment | | | | just forgot, but you don’t want it rolled over |
| dollars:a. Varying lengths of time (3 months to 5 | | | | with the original terms and the new current interest |
| years) until maturity, each term with a different | | | | rate. Ask the bank to make a special exception to |
| interest rate.b. Each bank will have different CD | | | | reverse the rollover. Also request they include the |
| choices, so you likely need to contact them to see | | | | interest earned on the new CD. A courteous and |
| where you get the best rates, terms and other | | | | respectful, occasional request for a valid reason |
| factors to meet your needs.c. These days banks | | | | works. I’ve done this a couple times over many |
| (and also other investment entities like credit unions) | | | | years.b. There are other examples. The point is this: |
| offer special deals to attract investment capital for | | | | take an active role in your finances, manage them, |
| their coffers, hopefully to lend to businesses, home | | | | ask questions until you understand situations. The |
| owners and others. These specials yield the best | | | | bank and all financial agencies are there to serve you |
| results many times in interest rates and terms. | | | | – within ethical, honest, and legal parameters. |
| 3. Find out about potential penalties and fees before | | | | 5. Certificate of Deposit Investments on the Internet. |
| you invest.a. Are there any penalties and fees or | | | | Be cautious with investing on the internet in CDs or |
| fines, if you need to withdraw some of the money | | | | any other investments. During this economic |
| from the CD before it matures? This is very | | | | downturn people can feel desperate, so they turn to |
| important because you want the money earning | | | | places they may see higher interest rates. The scams |
| interest every day, however an emergency can arise | | | | and frauds are higher during these times. My |
| that requires you to make a partial withdrawal of the | | | | recommendation is to stay away from the internet |
| principal of the CD and you want to know what that | | | | for your investments now, unless you are very |
| would cost you in real dollars.b. What are the | | | | familiar with the source, have used them previously, |
| penalties and fees? Here’s what I found, I’ll | | | | and believe you can trust them. |
| use an example of $20,000 CD. Each bank varies, so | | | | Protect your wealth, manage your wealth wisely. |
| I called banks for the information. The 2 scenarios | | | | Your future is in your hands! |
| illustrate | | | | |