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Money, Savings and Credit Talk

Savings 101: Your Introduction to CDs

If you’re starting to plan your future, you are undoubtedly thinking about money. As you enter the workforce, you will probably start to think about saving some of the money that you earn for the future. A savings account is one option, but there are several other banking products available, which can make it difficult to choose which type of account to open. Certificates of Deposits (CDs) are one of the most common types of savings products. They are offered by several banks and credit unions. The main difference between a CD and a traditional savings account is that unlike a traditional savings account, you face penalty fees if you withdraw your money before a pre-determined term.

There are several types of CDs available. Here’s a look at some of the most common:

  • Fixed Rate CD – With this type of CD, the rate of savings is fixed. In other words, the amount that you will earn in interest is fixed.
  • Variable Rate CD – With this type of CD, the interest rate fluctuates. It can allow the depositor to take advantage of rate increases that may happen in the future.
  • IRA CD – This is a regular CD that is held within an individual retirement account (IRA) that is tax-advantaged.

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