First, you need to lock your money up. If you want to get it back before the CD matures, you should know that you may have to pay a penalty. Ask your bank exactly what the penalty will be.
Next, if safety is important to you, make sure that your bank is FDIC insured. Look for the phrase “Member FDIC” or the FDIC logo.
Remember that credit unions are not FDIC insured, rather they are insured by the National Credit Union Administration (NCUA)– so they won’t be in the FDIC’s database. NCUA insurance is just as strong as FDIC insurance in my opinion.
Finally, remember that because the risk level is relatively low, your reward might also be relatively low. There are various types of risk, including the risk of losing your money and the risk of losing purchasing power. CD investors have a relatively low risk of losing their money (due to a banking system failure).
However, CD investors have a relatively higher risk of losing purchasing power over the long-term. Long-term investors should at least familiarize themselves with the alternatives and risks associated with other investments.
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