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Top 8 mistakes to avoid while opening a CD
A certificate of deposit (CD) is a savings instrument that allows investors to earn interest on their deposits for a fixed period of time. This is a low-risk option that generally offers a higher rate of return than savings accounts. However, the deposited amount must remain untouched for the entirety of the term period. To make the most of these investment options, here are a few mistakes one must avoid while opening a CD: 1. Skipping research Rates for CDs vary significantly between banks and financial institutions. One of the biggest mistakes one can make here is allocating all of their money to one CD before shopping around for better interest rates or terms. Research can help one learn how to maximize their investment. For instance, considering credit unions might be a suitable option, as they tend to offer higher interest rates on CDs in comparison to traditional banks. Additionally, one should know about the different types of CDs, such as: Standard CD: This comes with a fixed interest rate, early withdrawal penalties, and a single initial deposit. The terms for standard CDs can range from one month to 10 years. No-penalty CD: As the name suggests, this type allows one to withdraw funds one or more times without any penalties.