In doing some reading about Certificates of Deposit in an investment journal that I receive, I saw a reference to an article on the web site of the U.S. Securities and Exchange Commission. It addresses several issues that an investor should consider in connection with purchasing a CD from a bank or brokerage firm, including the following:
• Find out when the CD matures
• Investigate any call features.
• Understand the difference between call features and maturity
• For CDs available through a brokerage firm, identify the issuer. This point is important as it relates to FDIC insurance in the amount of $100,000.
• Find out how a CD acquired through a broker is held and titled
• Be aware of any penalties for early withdrawal
• Confirm the interest rate you will receive and how you will be paid
• Ask whether the interest rate changes during the term of the CD.
Anyone interested in investing in CDs or acquiring additional CDs for his or her portfolio will benefit from this article.