jcapulet

I've been reading about Certificates of Deposits (CDs), but I'm not sure I understand the benefits.

Is there any point in investing with CDs unless it's in very large amounts? For example, if the rate is 4.5%, and I want to do a 12-month, $1,000 CD...all I'd get back at the end is $45? Is that correct?

Could someone who knows about CDs please clarify this...I understand generally how it works (I think), except for the end parts.

Manc

and that's before tax unless you do CD's in a 401k.

jcapulet

Ah shite. >.< Didn't think about taxes.

tony126

It is proportional. $1,000,000 will get you $45,000. 4.5% is 4.5%.

NC Penguin

Depends on a number of factors-

how much you want to invest?
how long you want to invest? (would you need to get to the savings before maturity and what are the penalties?)
the tax implications

I have a CD maturing next month and I will be cashing in with a mind to looking at a long term savings product like a Roth IRA.


NC Penguin

Dan725

Make sure you check out the online savings accounts such as Citibank direct, Emigrant Direct, ING and HSBC Direct. HSBC Direct has an interest rate of 5.05% right now, on any amount you put in, paid monthly.

These online savers are beating many CD's hands down these days - no min or max amounts (unless you've got millions), interest paid monthly, no time period tie in.

If you are looking to invest long term, i.e over 20-30 years or so, you'd be better off loading a Roth IRA with low cost well diversified mutual funds.

Jerseygirl

We use ING Direct also.

AdobePinon

What Dan says. CDs are considered 'safe'. Part of being 'safe' is that they don't give much return. If you know you don't need the cash until retirement, there are much better options, like your 401(k), (or maybe 403s), and Roths. A lot of people split their savings between multiple CDs that mature 3 - 6 months apart, and then reinvest in new CDs. That way there is always some cash heading back your way just in case you need it. But right now, the interest rates don't seem to support getting CDs versus savings accounts.

jcapulet

I was thinking about starting really small, something like $1K...but from the way it sounds, I wouldn't be getting much back (for $1K). The investment would be around 3-5 years, only after maturity. Sounds like I would need to invest considerably more, and over a longer period of time, to benefit from a CD.

jcapulet

Thanks, I'll check those out. Right now, a savings account might be a better option.

mandpete

Thanks for reminding me.

After reading similar threads over the past couple of years we finally opened a savings account with HSBC today.