How to Buy Bank CDs

Certificates of deposit, or CDs, are a way to make more money at your bank than simply putting your money into a savings account. By purchasing a CD from you bank you allow the institution to keep that money for a specified period of time, and in return you receive a higher interest rate. CDs with longer periods of maturities pay higher rates than short-term CDs, so you will have to decide for how long you can part with the money.

Difficulty: Easy

Instructions

1. Shop around. Different banks and credit unions offer varied rates for CDs, so find the one that will make you the most money. You can sometimes talk any bank you already have some sort of account with into offering you a better rate for being a valued customer.

2. Look online. People often forget about online banks when looking to put their money into CDs. Online banks often offer the best rates because they have lower overhead than banks in brick-and-mortar settings.

3. Tell your lending institution of choice that you want to buy a CD and the banker will usually give you a standard disclosure form to sign. He will then transfer the money into a CD for you.

4. Choose whether or not you want to reinvest when the CD matures. You can really see your money grow by reinvesting, as you will then compound earnings by getting interest on your interest. At the time of the CD's maturity you will generally have a 10-15 day window on what to do next with the money. Know your bank's policy and act accordingly.

Tips & Warnings

• Do not overextend yourself. Only put money into a CD that you can live without for six months to a year.

Resources

• Site for comparing CD rates