Pros and Cons of Investing in a CD

I’m looking at possibly saving up some money to invest into a CD so I thought I would look up a few pros and cons of the investment.

Here are the pros of investing in a CD rather than other investments.

Your money is in a safe place with higher interest than it would get in a savings account. While there isn’t much of a chance of making big money, it is a safe investment.

The FDIC (Federal Insurance Deposit Corporation) insures CDs up to $100,000 so you can be assured that you will get the money back when the CD matures.

You can take a loan out with a lower interest rate than the normal bank interest rate.

The cons of investing in a CD would be:

There is a lower risk, so therefore lower yield. While you can be assured that your initial investment is safe, you don’t have the possibility of earning greater amounts of money that you may earn with higher risk investments.

The CD is susceptible to market fluctuations. While the economy is doing well, interest rates will be higher. There isn’t a need for the government to encourage people to borrow. If the economy isn’t doing as well, interest rates will decrease, allowing people to borrow money less expensively and put that money back into the economy by shopping, adding an addition to their homes, etc.

There is a penalty charged (unless you have a brokered CD) if removing the money earlier than the term of the CD.

The jury is still out on my decision but at least all the facts are on the table.

Empty!

I came to the realization this weekend that my banking accounts are empty. It’s not totally a bad thing because the reason that they are empty is I paid off a ton of debt last month. None the less its still a scary thought that my savings is gone and I am back to square one (the same position I was in when I started this blog) but the difference this time is that I have learned that through discipline and some common sense I can build my savings back up again just in time to make another lump payment towards my debt. So goes the cycle.