- November 2, 2019
- Mark Elwes
Certification Of Deposit: Is It Truly A Great Way To Save Money?
Table of Contents
You may have followed various ways to grow your wealth. Everyone follows a different path to earn money to avoid money-related problems. Someone goes for some passive income methods or part-time work. Here, the ultimate goal is EARNING MONEY.
In this blog, we are going to discuss one of the secure ways to grow your money. However, you can follow the methods that you are using like borrowing money through personal loans. But this one is a bit different and unique method as compare to others and i.e. Certification of Deposit (CD).
You might read this word for the first time but you do not have any idea how effective it is. We have discussed all the points related to it even we have covered both advantages and disadvantages. And we mentioned something that you should know in advance. First, start with the basic, then we will learn more about it.
Read on!
What is the Certification of Deposit?
It is basically an agreement to deposit money in the bank for a certain period of time. Bank will pay you interest over your amount.
Let’s understand this in details…
CD is a great way to earn money. All you have to do to create an agreement between you and your credit union or bank. Here, you have to promise that you will not withdraw the amount for a certain period (it is mention by the banks). In return, you will receive the high-interest rate over the amount.
The period may vary from bank to bank. It can be for short term aim or you can choose a long term where you can deposit money for five years. You can receive an extra benefit in case of the long period but once you fix time, then you will not able to withdraw money.
We have mentioned that it has advantages as well as a few disadvantages too. Now, let’s have a look at them…
- Advantages of Certification of Deposit
It can do wonder to your financial condition. And if you are ready, then see how efficient this method is.
- Secure method
- They offer high-interest rate
- Predict the total amount
- Broad selection
- Control unnecessary spending
- Secure method: It is one of the major reasons that make the CD the best way to earn money. Here, you have to take care of one thing and i.e. the company should be verified. One of the major advantages is that it is not like stocks where you may either gain money or lose it. But in this, you will earn money rigorously without worrying about losing them. Suppose for some reason your plan get fail, and then your money is not being affected.
- They offer high-interest rate: You are going to receive a high-interest rate as compared to other types of account like saving or current account. And it is a one-time deposit and once you complete the period you will receive a good amount.
- Predict the total amount: You have an idea that after a certain period you will receive the money. Now, it will facilitate you to predict the sum. It would be better if you choose this option just to achieve your long term goal. With this, you will get the idea about how much you will receive after ‘5 years’ for example.
- Broad selection: Here, the company does not follow any strict protocol. So, it is depending on you that how much you will choose and for how much time. You can choose for three months or five years too.
- Control unnecessary spending: You can easily cope up with the problem related to impulse purchasing or unnecessary spending. This one is actually a good way to save money because here, you deposit the money for a fixed time. And the bank will not allow you to withdraw the amount before maturity.
You can see there are so many benefits you will receive from this small idea. In our personal opinion, using this method for achieving long term goal may be a good choice. If you face a lack of money, then you can bridge the gap with the loan. You can approach online lenders in the UK who offer short term loans as well as long term funds too.
Let’s have a look at the cons
- Disadvantages of the Certification of Deposit
- Difficult to manage the surprising cost: You better know that your amount is fixed for a time. But what will happen when you face some sudden expenditure. In that scenario, you could not able to access the money. If you try to do, then you may have to pay some penalty.
- Interest rate is constant: No matter what is the situation, the interests will be the same.
In short, you only receive full benefits when it matures. Before that time, your money has not any value. It is the best option when you have to save money for an emergency situation. Totally depend on this can create a problem for you.
You can read both sides of the certification of deposit. Now depending on the financial situation and savings, choose the suitable period.
Mark Elwes is the Editor-in-Chief at Extramilefinance. He is a notable member of the content strategy team since his joining in 2017. Driven by his fondness for the finance industry, he has spent years gathering as much knowledge as possible about various financial products that include loans also. Previously, Mark worked as a senior journalist writer with experience in writing blogs and articles.
