Question 1

What happens if I withdraw my money early from a CD?

Accepted Answer

Most financial institutions impose an early withdrawal penalty, which is often a set number of months' worth of interest (e.g., three to six months). This penalty can eat into your principal if you withdraw very early. Always check the specific terms with your bank before opening a CD.

Question 2

Are CDs a risky investment?

Accepted Answer

CDs are considered one of the safest investments because they are FDIC-insured up to $250,000 per depositor, per insured bank. This means your principal is protected. The main 'risk' is the opportunity cost if general interest rates rise significantly while your money is locked in at a lower rate.

Question 3

How are CDs different from a regular savings account?

Accepted Answer

A CD requires you to lock your money away for a fixed term (e.g., 1 to 5 years) in exchange for a fixed, and usually higher, interest rate. A savings account offers more flexibility, allowing you to withdraw money at any time, but typically has a lower, variable interest rate.

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