What is a CD and how do they help your financial position?

Curt Queyrouze

The term CD can bring to mind the days when physical media was king and a trip to the record store was required if you want to pick up the hottest new releases. However, CD has another important meaning in the world of personal finance, a vehicle for earning money reliably over time that can put your savings to work. The certificate of deposit is a long-established financial instrument, but despite its availability and dependability, not everyone understands what a CD is, nor how it can fit into an effective personal finance strategy. To learn more, read on.

What is a certificate of deposit?

A CD is a form of time deposit. In simple terms, it means you commit to providing a certain amount of money to your financial institution for an agreed-upon period of time. In return, you receive your money plus the interest earned once that time period expires.

Why is the CD a valuable option for you? And how is it different from savings accounts, which also bear interest, besides the requirement to leave the money untouched until the term of the CD ends? Because you leave the money untouched and commit a specific amount to the CD at the beginning of the process, financial institutions generally offer higher interest rates than are seen with savings accounts. Additionally, you can choose to invest more money as well as extend the term of the CD to further improve the interest rate. Many financial institutions offer a variety of options, allowing you to balance the need to eventually access the principal and enjoy the interest with the higher returns of a longer investment.

One of the most important concepts to keep in mind in relation to CDs is their guaranteed nature. As a deposit at a facility covered by the Federal Deposit Insurance Corporation, you don't have to worry about losing the principal, even in a worst-case scenario. As far as a combination of effective investment and security goes, there are few options better than the CD. If you're looking for a stronger return than what is provided by a savings account, even from the high-yield version offered by TAB Bank, but don't want to invest in the stock market with its inherent risks, a CD is an effective choice.

Incorporating a CD into your financial strategy

Once you have a budget and have saved the necessary amount of money for an emergency fund - roughly three months' worth of expenses - investment is a crucial element of enabling your long-term financial security. Investment decisions depend a lot on individual affinity for returns as well as tolerance of risk and desire for security. If you want to keep part or all of your investment money safe from potential losses, a CD might be exactly what you're looking for.

Beyond a general investment strategy, a CD can also be beneficial for specific projects or financial goals. Have home repairs on the horizon, or need to set an amount of money aside for a wedding? A CD can help you keep that money set aside. It's difficult to withdraw ahead of time and the penalties for doing so are clear, and it provides a return until the term of the agreement ends. With a little planning and forethought, you can use a CD to secure the funds needed for a variety of specific needs.

TAB Bank is here to offer a variety of CD terms to those looking for an effective yet secure vehicle for investment. Whether you want to invest for six months or five years, TAB has an option that will meet your needs and provide measurable, reliable returns that you can use as soon as the term of the CD ends. Want to learn more about how to invest in a CD, or the rates and terms we offer? Check out our page with the most recent CD rates and terms, and reach out to us to learn more.

About the Author

Prior to joining TAB Bank, Curt amassed over 30 years of commercial finance and commercial banking experience. His career has included various credit, sales, and portfolio management positions in asset-based lending, factoring, corporate banking, oil and gas finance, real estate lending, financial institutions, healthcare finance, and middle marketing lending. Previous roles include Senior Vice President/Director of Loss Mitigation for Whitney Bank where he managed the resolution of a multi-billion-dollar problem loan portfolio. He also previously served as Division Credit Executive for PNC Business Credit and as Chief Operating Officer of The Receivable Exchange, playing a critical role in the launch of this internet-based, factoring auction platform.

Curt holds a Bachelor of Science degree in Accounting from Louisiana State University. He has also taught many classes on financial analysis, cash flow analysis, loan structuring, and workout strategies. He has served in many volunteer leadership positions for non-profit organizations advocating arts and humanities and disease awareness and prevention. As President, Curt oversees all strategic, financial, credit, and operational functions of the bank.
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