What are CDs (Certificate of Deposits)? - YouTube

Hi, this is Joanne and this is financial Fridays on the broadcast sunny channel, and we will be talking CDs.

Okay CDs explain. What are they and how to get one?

So what is a CD a CD is a certificate of deposit? It is a low-risk, which also means low return

you can think of a

CD like a savings account because you are putting money a

Chunk of money into it that earns interest. However, the difference is in a savings account you tend to get

You do get an interest rate, but it tends to be lower

And you can pull out your money

Almost at any time and type ends on your bank

Sometimes they only allow six withdrawals or something like that

But you can get it out more easily without penalty than with a CD

The CD tends to have a higher interest rate, but keep in mind

occasionally I have found that the savings account has a higher interest rate than a

CD that I personally think it is better to keep the money into the savings account until the CD

Interest rate goes up

Also, you cannot touch the money once you put it into the CD

Until it matures and that would depend on which CD you choose there are different timelines now

Technically you can get the money out. There's just a penalty if you do so

So the pros and cons pros it is low risk

You are not likely to lose any money in it

it is insured as long as you go through an FD a member of the FDIC Bank and

I have yet to find a CD that is not a fixed rate. So I'm I

say guaranteed fixed rate, but I must admit I

Have never Oh, I haven't always seen that word guaranteed, but it is a fixed rate

so

Savings accounts do fluctuate once you put your money into the CD it is that rate until you take it out

and when it becomes mature

I mean it is somewhat liquid in the sense that you can take the money out if an emergency comes up

but

You will be penalized if you don't take it out at the proper time, but like I said if an emergency was coming up, so

The cons

It has a low return it is tends to be higher than your savings account

So if you have money sitting there and your savings account, and you say why?

This is a good place to put it

but

It is a low return

You can't touch the money not even the interest until it matures

Technically you can't but you can but you will have to pay a penalty

And the penalty if you take the money out early, there you go

And then there's a short time and this is always drives me nuts about CDs

There's a short time window to take the money out usually between 10 days in a month

You'll have to check with the bank. That is supplying it

and if you don't take the money out when it matures in that timeframe, it will roll over into a

CD with

The same

Same time limit although the interest rate may be different it may be whatever is available

at that time

so

Then you're stuck in the CD again

If you get a five-year CD and you forget to pull it out you're in enough for another 5 year CD and you?

May need to pay a penalty you may want this but I always get stressed out about that

How do you get a CD you decided you wanted to get one?

first you want to determine how much money that you have to put into the CD and

With that you want to determine how long you?

Can part with that money. So if you know, you're going to buy a new car soon

You want to make sure that money is available and not put it in a long-term CD

So those two factors you want to keep track of but then you want to get the CD

rate list from the different banks

Because you want to shop around and some banks may have a promotional

CD rate also if you check with your

The the place that you bank at sometimes they have a member eight

sometimes you know one bank is just

focusing on their CDs rather than another banks the mortgage and that's why there are

different rates depending on the CD

So before we look at a interest rate list

I wanted to explain to you the difference between interest rate and the annual percent yield or APY

So interest rate is how much?

The the

How much?

What the percentage they'll use to?

give you your interest but the APY is how much you will end up with at the end and

Just keep in mind a py is

higher than the int it's always higher because

your interest that you earn each month is cumulative so I'm gonna give you an example and

The numbers are not accurate. I'm just

Put something together to give you an idea of what I mean. So you put $1,000 into a CD and

Come January you get a dollar interest with you, so

You don't get that interest it gets put into your CD so that way in March

You get another dollar for?

Because it is giving you interest on that dollar now so

That's a pretty good interest

But I don't like it. This is not correct, but

So now you have two dollars and four cents and then come April

It goes up with just a little bit more on

So now you have one thousand three dollars and ten cents and so on and so forth. Actually. I'm looking at these numbers

this is terrible, but

Yes. So the reason the APY is there is because it's it's a compounding interest

So keep that in mind and you could go by either just make sure you're comparing

Interest rates with the interest rates or APY with a py and I'm seeing more and more

That banks are just putting up the APY. I

Guess you can say a py is the actual interest that you'll be getting and not

Their monthly

Broken down monthly anyway

That's how I remember a py actual its annual but I think actual okay

Let's look at some interest rates. This is a CT calculator and

See this goes by a py as well

This is with bank rate, which it has been around forever and

So it will calculate how much you will get

In front if you have a five month CD

I recommend this if you wanted to see how much you end up with at the end

Now this is magnified money and it's by Lending Tree another

lending another online banking a

Website that's been around forever and

Let's start by looking at this top one. I

looked up best CD rates and

This are all online CD rates

I personally would recommend if this is your first CD go to the bank and talk to them because they'll break down

everything you need to know and what's involved and you can ask questions and everything and

I find banking on line. It can be a challenge when you're first opening an account that you don't have a

Relationship with because

You have to put in some personal information, but here we go

So the CDs can be anywhere from six months to five years. It's with Capital One it is

0.6 APY to

3%

APY

no minimum deposit

so when you open this up it

Lists how long you can keep the CD in and what are the interest rates and as you can see as the term?

Increases so does the APY interest rate?

I'm going to show you allied bank three months to five years

0.75 to three zero dollars minimum deposit. No reason I'm showing you this

again

With the term level the APY is going up

but if you look at the really high term levels they also have

it broken down into how much money you deposit and as

the deposit amount goes up say so does the interest rate so

This is a little bit more common. Although I noticed in all these it's mainly

Termed the 2-cd, but I'm gonna show you on two different bank accounts

Where you can find the CD rate so you type in their search engine CD rates I

Don't want our a

Let's open a CD today. Okay. So here's Wells Fargo Fick CD rate

So here you can see that the turn levels are going up

They have a column for interest rate and a py and then the bonus interest rate now

Like I said, this bonus interest rate could be because you are you bank with Wells Fargo

So they'll give you a little bump up. It could also have other implications

They may want you to open up an account or something to that effect

But we're going to just stick to the interest rate in APY. So

For nine months you can see here as it goes up

It's lower down here for twenty nine and thirty nine months. And you might be asking why is that?

well, this is probably a

Promotional reach I to get people in to buy CDs

And that's why it's higher

The minimum is five

thousand now we go down here to the standard rates and

As here, you can see that the term level is going up

And same with the interest rates now

You see that the interest rate and APY is the same

That's because it's only for three months and the interest rate is so low

that these are

very close

So that's why

That is now here you can also see

That this is how much money you need to deposit?

Although I'm not seeing any difference in

In the interest rate changing so you're okay there

No, that's okay. So now let's try Bank of America Oh

TV reads

There's featured and standard

Let's try featured

Here gives you an overview

This is saying the minimum of ten thousand, but let's look at it it's insured

automatic renewal ah, they're putting that as a

Feature. This is normal automatic renewal. I don't see another feature

We're gonna here you can click on today's rates annual fee transaction and early withdrawal penalty will apply

Let's see today's GD rate

All right, so

This is effective May 14

2019 and I say point this out because if you decide today that you don't want to buy dry

And you're gonna buy tomorrow or you know get a CD tomorrow

Check the rates again, cuz they do change. I have heard them change

At one time per hour, but I think that's rare

I've they whole pretty steady, but I would still check day today

if you decide to

Make it. Okay. These aren't CDs

Promotional CD and IRA products. There we go. Right here is a ten dollar ten thousand dollar minimum

to get open a CD

So we'll ignore the less intent so you can see here the rate and the AP

Y is going up not only by term

Well, well 36 seven months is shorter, but it's going up by term and also

but

Mainly by how much you deposit? Yep. I've got a million dollars to put into a CD because that's where I'd put it

Okay. What?

Here - that's that's probably for that I already they're talking about

CD rates are going up per term

But it's staying steady overhead the amount that you're putting in that's kind of new oh

Here's IRAC

Let's now look at we saw

Standard

With a low minimum okay with a little as a thousand. Here's the benefits yada yada

What are the rates oh

You could put in what term but I would want to see all the reads out here we go great. No

Let's open now. Oh, they want you to know term

Beforehand, that's a painting. Yes. I

Didn't just curse did I?

So less than ten thousand well, that's really low

Yeah

According to this I'd go at Wells Fargo, but you can check the other part on banks in your area

I even find that the small banks

Sometimes have some very good

promotional ones

So that my friends is

The CD rates explained I hope you got a lot of information out of that

I encourage you to talk to your banker to get more information

and if you have any questions

I'll try and answer them just comment below and please like share it subscribe to this site it

Helps and if you want to learn more financials check out the financial Friday playlist on the broadcasts on each channel. Thank you