A certificate of deposit account (CD) allows a user to make a higher rate of interest than a regular savings account. With a CD, an investor deposits money into an account and promises not to withdraw the amount from the bank account for a specific period of time. In exchange for the promise not to withdraw the deposit, the bank pays a higher interest rate. If the investor takes the money out of the account early, there is usually a penalty.
Determine how long you are able to go without using the money you would deposit in a bank account. CDs have maturities usually of three months, six months, nine months, 1 year, 2 years and up to 5 years. The longer the amount remains with the bank, usually the higher the interest rate a bank will give the investor.
Shop for the best interest rate you can find. Go to different banks and inquire about their current rates. Also, use the Internet and search for rates online.
Go to the bank and deposit the amount you want in the CD, when you choose the bank that works best for your needs. After depositing the money, wait until the maturity date and you will earn interest on the amount. If you want to continue saving, most banks allow the CD to rollover into another CD with the same maturity date, but the interest rate may change.
Let the interest accumulate. To make the most money from a CD investment, let the interest accumulate, so that the earned interest will also earn interest. The alternative is to have the bank send you the interest periodically, such as monthly, but if you don't need the monthly income, you'll make more money at maturity if you let the interest remain in the account.
Carter McBride started writing in 2007 with CMBA's IP section. He has written for Bureau of National Affairs, Inc and various websites. He received a CALI Award for The Actual Impact of MasterCard's Initial Public Offering in 2008. McBride is an attorney with a Juris Doctor from Case Western Reserve University and a Master of Science in accounting from the University of Connecticut.