A bank CD generally offers an improved rate of return over bank checking accounts, savings accounts and money market accounts. The higher rate of return or higher interest rate offered on bank CD is a result of the mechanics of how these accounts function.
CD accounts are established when the account holder deposits funds in a bank for a predetermined period of time and in exchange for allowing the bank to hold the money for a specific period of time, the bank offers a higher interest rate than most other bank savings vehicles. The capital initially invested in a bank CD is also FDIC insured but penalties may imposed for account holders that cash out early or try to access their funds before the maturity date.
Bank CDs can be a good component of any investor or savers asset mix. When choosing bank CD options it