Are CD’s Worth It?

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By Heaven Stubblefield

At one time, banks were all about getting people to put money into a CD.  While these things use to be used exclusively by the music industry, banks caught on started spreading the word on an incentive to make money with them.  Unfortunately, CD’s are not worth it and here’s why.  There are better places for your money, it is difficult to access your money once it is in the CD, and the return is simply a joke when you put money in.

First, a CD is a glorified savings account that has a lot of strings attached.  CD’s were designed to give customers a place where they could gain interest from the money they deposited.  If you look around your bank, there are a lot of places where your money would do the same without the strings attached.  If you are thinking about putting money in a CD, don’t.  Instead, put it into a traditional savings account or invest it in a mutual fund.  CD’s may sound cool to teenagers, but to savvy finance experts, they are just a fad.

Another reason why you shouldn’t put money into a CD is in regards to accessing your money.  Most savings accounts allow you to withdraw money that is gaining interest without any fees or fines.  However, in a CD situation, if you take money out of the CD before the mature date, you will pay a fine and possibly not accrue any interest.  That’s like buying a music CD, liking only one song on it, but being stuck with all of it and if you try to return it they don’t give you your money back.  Then, you take your CD to a music dealer who only gives you a percentage of the money you paid in the first place.

Finally, the return on a CD is simply a joke if you are looking for a quick return.  I found this out the hard way.  At my local bank, I came in with a $500.00 deposit.  Before I knew any better or researched the idea, I put the money into a 5 month CD.  That meant my money was tied up for the next five months but I was going to make money off of it. I was kind of excited, until I cashed in the CD.  I made $16.00 from that CD.  I could have invested that money in the stock market extremely conservatively and made more money that that.  Don’t buy into CD’s, even music ones.  There are better ways to use your money.

What do you think of CDs?