If you are looking for a new way to invest your money in New Bedford, a certificate of deposit (CD) just might be the answer. The best way to describe what a CD is and how it works is to call it a “time” deposit. This type of investment account is flexible, allowing the investor to choose the date of maturity on the investment. Of course, the longer the investment term lasts, the bigger the payoff will be at the end of the term.
Certificates of deposit are popular investment products available through credit unions in New Bedford and all across the country. They operate very similar to a traditional savings account, making them very straight-forward and easy to understand compared to other, more complicated types of investments. However, the obvious difference between a CD and a savings account is that the certificates of deposit are invested and held for a fixed period of time.
Certificates of Deposit: Money in the Bank
CDs are insured by the FDIC or Federal Deposit Insurance Corporation for banks and by the NCUA or National Credit Union Administration for credit unions. Because this type of investment is insured, it is considered to be virtually “risk-free” for the investor, making them very appealing in the current economic market.
The amount of money you invest and the term that you choose for your investment has much to do with your payoff at the end of the term. Your New Bedford credit union can tell you up front the minimum deposit amount that is required and can go over details regarding the available terms and current interest rates.
The terms vary between financial institutions, so it is important to ask questions and talk about what type of investments are available up front. In most cases you will invest your money in New Bedford for a certificate of deposit somewhere between six months and five years. The intent of this investment is for the CD to be held until the end of the term. At that time, the investor may withdraw the accrued interest and the initial deposit amount.
How a Certificate of Deposit Works
A higher APY or Annual Percentage Yield is paid for investments that are made over a longer period of time. For example, a five year CD would pay at a higher rate than a one year CD. In some cases, higher percentage rates are offered for larger investments, referred to as Jumbo CDs. Speak with your New Bedford credit union representative to find out if such investments are available at this time.
In the past, members who would open a CD in New Bedford would receive a physical, paper certificate in exchange for their investment. However, many institutions today simply provide a book entry with the item being shown on the member’s monthly statements, rather than an actual certificate. If you prefer to have a hard copy receipt for your CD purchase, simply ask your credit union representative for a paper statement. In some cases you can also print a statement at home from the institution’s website.
How to Close Out a CD Account
There is a substantial penalty charged for any withdrawals made before the term of maturity has been reached. The penalties can vary between institutions, but one example would be a five-year CD that is withdrawn before the maturity date being subject to losing six months’ worth of interest as a penalty. Because of these penalties, it is not in your best interest to withdraw your investment before it reaches maturity except in extreme financial situations.
Shortly before the term of your CD is reached, your institution will likely mail you a notice that gives you your options. You have the choice of withdrawing all of the money that has accumulated in your account or rolling it into a new CD account. In some cases, a window is allowed for withdrawal after maturity and if the account holder does not state their intent, the institution may roll the CD over into another term automatically.
Where to Open a CD in New Bedford
Established in 1911, St. Anne Credit Union is a member-owned, non-profit financial institution serving members throughout the Bristol and Plymouth counties in Massachusetts. Serving over 3100 members and with over $18,000,000 in assets, St. Anne Credit Union is the oldest credit union in all of Southeastern Massachusetts.