Rising rates can be a good thing for your savings goals. That’s because financial institutions sometimes raise their own rates on deposit products like certificates to help their members cash in on current conditions.
A certificate is the same thing as a certificate of deposit (CD), the only difference is where you open one. If you go to a bank, you have access to CDs. At a credit union, however, they’re called a certificate. Opened with an initial deposit, these fixed-term accounts allow you to earn a guaranteed return. Once they reach maturity, you can withdraw your balance and the earned interest with no penalty. Sounds great, right? While many of these accounts are worthwhile, it pays to cool your jets and complete some preliminary steps before opening one. Doing so can help you pinpoint the best option and save smarter .
3 steps to take before opening a certificate
1. Do your research
Price shopping is always a good idea, and certificates are no exception. Every financial institution will offer a different rate on their deposit products. That’s why it’s important to do your research and find the best rate available to you.
- Tip: Here at General Electric Credit Union (GECU), we believe in opening doors to new saving opportunities for you and your family. That’s why you can expect certificate rates so good, they’ll make you do a double take!
2. Choose the right term
It’s important to remember that certificates, for the most part, require you to lock in the funds for a set period. Withdrawing these funds prior to the maturation date will result in fees, so it’s best to remain hands-off until the term ends.
For this reason, it’s crucial to mull over which term option makes sense for your budget both now and in the future. If you plan to make a large purchase in a year – such as a home or car – it might not make sense to opt for a 3-year certificate using money you’d need to use. Typically, financial institutions will reward you for choosing a longer term by offering higher rates than you’d find on their shorter-term certificates. So, a longer term may be the best choice if you can swing it and won’t need the funds during your chosen term.
3. Make sure you’re covered
Deposits at federally insured banks are protected by the Federal Deposit Insurance Corporation (FDIC), while federally insured credit unions are protected by the National Credit Union Administration (NCUA). For the latter, funds are protected up to $250,000 per accountholder, per account category, and per financial institution. This means that, in the off chance a financial institution fails, your money is protected.
Deposit accounts that fall under coverage include checking accounts, saving accounts, money market accounts (MMA), and certificates – among others! Verify that a financial institution is federally insured before committing to keeping your money there.
- Did you know? GECU is a federally insured credit union, so you can feel good knowing your money is in safe hands. Your deposits are protected up to $250,000 per account, per accountholder, per financial institution – but there are ways to extend coverage! Learn them here.
When it comes to certificates, GECU’s are a step above the competition. In addition to great rates, you can expect no monthly maintenance fees and a wide range of term options for the most flexibility. Want to talk through your options? Message us in Online Banking or our mobile app using Secure Chat. Or, visit our online schedular to make an in-branch appointment. We’ll get to know you and your goals to determine the perfect match.