High Yield CDs
A CD is a Certificate of Deposit. A CD is quite similar to the purpose of a savings account, but it is still different. The point of the CD is to have a set number of dollars deposited to a bank for a set number of time, and the popular terms are three months, six months, or one to five years. The idea of having a CD is to keep it until it matures, and the CD matures when its term has passed. So if you got a 3 month high yield CD January 1st, it will mature 3 months down the road on April 1st. When you withdraw your funds from the CD, you get back your principal amount along with the interest that you earned. CDs have a higher interest rate so that they can attract people to keep their money deposited for a set number of time, unlike an account like a savings account where money could be taken out easily at any time.
It seems that smaller banking institutions are likely to have a better high yield CD rate than larger institutions. It is best to make sure that any money you deposit into a CD stays there until it matures. Each bank will have different rules for how they handle early withdraws, but it usually means that you would forfeit a certain amount of your interest that you have already earned.
CDs are insured by the FDIC for regular banks and by the NCUA for Credit Unions. Putting your money into High Yield CDs are a great way to earn some more interest than a savings account. Make sure that you know you will not need this money, since it is in your best interest to keep the money in the CD until it matures.
