In the previous post, you have read about Save Your Money in Certificate of Deposits / Fixed Deposits and now you will now what to be asked before you invest in it.
1. When the certificate of deposits mature?
Before you purchase any CD, make sure you know in writing when it will be matured. A lot of people didn’t realize that they have to wait for years before it matures.
2. What is the certificate of deposits interest rate and how you will be paid?
You should receive a disclosure of documents to tell you that the interest rate is fixed or variable, and how you will get paid either monthly, annually and also how you will get paid?
3. In variable-rate certificate of deposits, know when and how
If you’re interested to purchase the variable-rate CD, make sure that you know when and how the rate can change. Thus, you can take some advantages.
4. Any penalty for early withdrawal?
Be sure that you know if any early withdrawal is made, how much you have to pay, if any.
5. For brokered certificate of deposits, identify the issuer
Find out where the deposit broker plans to deposit your money and please make sure all the procedure and regulations involves and also whether your money is insured by the federal agency.
As CD has become more complicated nowadays, please really understand all the terms, the disclosure statement and don’t be dazzled by any high yield certificate of deposits.
6. Investigate any Call Features
Callable CDs give the issuing bank the right to terminate the CD after a set period of time, but you are not given the same right. Thus, if the bank redeems your CD, you should receive the full amount of your original deposit plus any unpaid interest.
7. Understand between the Call Features and maturity
Don’t assume anything. Always be careful. If you have any doubt you should ask the bank or the brokerage firm the explain the CD’s call features and to confirm when it matures.
(Original source: US Securities and Exchange Commission)