Certificates of Deposit, or CDs, are a great tool for building up savings. A CD generally has a better interest rate than a standard savings account, and is still a form of investment that carries a very low amount of risk to the investor. While it is possible to establish CDs by visiting a local bank, many people take advantage of Internet banking to establish and managing a CD online.
The process for getting a CD online is not unlike that of establishing a Certificate of Deposit with a local brick and mortar institution. An individual will open an account with the online bank, select the most appropriate terms offered by that institution, and fill out the online application for the establishment of the CD. If approved, the new customer makes an electronic deposit into the newly established CD for at least the minimum amount required.
Once the customer has established the CD online, he or she can monitor the growth of the balance via a secure Internet access to the account. Generally, the bank that has issued the CD will provide periodic updates online in regard to any change in the annual percentage yield, or APY, associated with the account. This process is similar to the way that banks periodically notify loan customers of a change in the annual percentage rate or APR that apply to a bank loan. The depositor can also see when interest payments are applied to the CD, how much time remains until the CD matures, and what options are available for rolling the CD into a account or even cashing the CD when it reaches maturity.
As with the process of comparing CD accounts with local banks, it is also important for investors to compare the terms and conditions of each CD online. This makes it possible to identify an account offering that will help the customer reach his or her financial goals. For example, if the idea behind the CD is to lock in funds that will be used for a vacation in two years, the investor will want to find an eighteen month CD offer that has the best possible rate of interest. Should the plan be to use CDs to build up funds that can be drawn upon in an emergency situation, the customer will want to look closely at offers featuring a lower penalty for early withdrawal.
Many brick and mortar banks are now offering the ability for customers to purchase a CD online as well as make a purchase at a local branch. This allows them to compete with Internet banks that function completely in a virtual setting. While much of the terms and conditions that apply to these different CD offerings are the same, it is still important to read the provisions carefully before making a commitment with your money. Doing so will improve your chances of getting the most from your CD purchase, both in terms of earnings and in general customer satisfaction.
