Do you currently invest in Certificates of Deposit? Did you know that Share Certificates are essentially the same as a Certificate of Deposit (CD) issued by a bank? What’s the difference? A Certificate of Deposit pays interest; a Share Certificate pays dividends because of Tower’s unique share ownership structure as a federal credit union.
Share Certificates are offered for a variety of terms, with annual percentage yields substantially higher than a regular savings or share account. They are issued for a specified period of time, typically between six months and five years. And you can invest as little as $500.
Your rate on a Share Certificate is locked in for that period of time, even if rates decline. At the end of the term, you have the option to rollover to another Share Certificate, or you can also take the money out or transfer it to a regular share or checking account.
Some Share Certificates offer a variable rate—called Bump Ups. These certificates have an introductory rate that allow you to “bump up” to a higher rate once during the term if rates rise. Certificates are time-driven, fixed-rate products, so you must take into consideration that there may be substantial penalties for early withdrawal should you need the money sooner.
What are the advantages of Share Certificates? If you have Share Certificates, you really can grow your money faster. They are a low-risk way to increase your savings. For people looking for higher earnings on their savings without the risk of some other types of investments— like mutual funds or stocks—Share Certificates are a great way to structure your savings portfolio, no matter what the size. Unlike a risky investment, Share Certificates and other deposits at Tower are insured through the National Credit Union Administration (NCUA) up to $250,000.
How should I use Share Certificates? If you have money you can tie up for a few months or more—for example, a portion of your emergency fund that you wouldn’t need for at least six months, or money earmarked for tuition or retirement income—certificates can be a great savings option. You can store your cash without being able to touch the money, and your savings goals will remain intact.
Do Share Certificates make good gifts? They sure do, if the recipient is a member of the credit union! The next time you are in a gift quandary for a grandchild’s birthday, a college graduation or your niece’s wedding, consider opening a Share Certificate in the recipient’s name. It will be a gift that keeps on giving!
Resources: Bankrate.com, NerdWallet, Kiplinger