They say everything is cyclical, so trends that fade away will typically come back around again. Like scrunchies and high-waisted jeans, certificates are becoming appealing again.

People are still grappling with the effects of rising inflation even a year after prices started to soar. This leaves everyone looking for a silver lining. At this time, it’s certificate rates! They’re starting to climb, and your best bet for maximizing your savings is certificates of deposit (CDs).

Certificates of deposit, also known as share or savings certificates, are investment accounts that yield higher returns than traditional savings accounts. They offer a range of financial perks with very little downside. Keep reading to find out if adding a CD to your savings plan is right for you.


What is a Certificate of Deposit?

Most credit unions and banks offer three primary savings and investment accounts:

Among the three, certificates of deposit generally offer the highest rates. However, there is a tradeoff in exchange for earning more dividends. Your money is locked in with a CD. So, you cannot access or withdraw your funds without incurring a penalty. While this detail might seem like a drawback, it’s often a blessing in disguise. It forces you to save money.


How Does a Certificate of Deposit Work?

CDs are broken up into varying terms. This is how long your money will be “locked up”. For example, you’ll often see certificates of deposit displayed the following way:

Certificate of Deposit Term APY or Dividend Rate
12 Months 1.55%
24 Months 1.85%
36 Months 2.25%
48 Months 2.75%
60 Months 3.40%


Characteristics of CDs

  • While terms vary by financial institution, they typically range from six months to five years.
  • Generally, the longer terms offer the highest rate of return.
  • Your funds are locked in during that term. You’re usually required to pay a penalty if you need to break the certificate. The penalty is typically a portion of the interest earned.
  • Most CDs require a minimum deposit, such as $500 or $1,000.
  • Some financial institutions offer Jumbo CDs. These are often $50,000 or more but grant you a higher yield (Money FCU does not offer jumbo CDs).

Advantages of Certificates of Deposit:

  • There is essentially no risk when investing in certificates. Your account is either federally insured by the National Credit Union Administration (NCUA) or the Federal Deposit Insurance Corporation (FDIC) up to $250,000.
  • With guaranteed returns, they are an excellent alternative to the rollercoaster ride in the stock market.
  • Dividend rates are generally fixed. This way, you’ll know exactly how much your investment will return over the life of its term.
  • You can withdraw funds from your account quickly and easily since the investment is with the Credit Union versus an investment agency.
  • CDs force you to save money by locking in your funds until the end of your chosen term. You cannot dip into this account for needless spending like you could with a traditional savings or money market account.
  • Lenders will often attract money through CD promotions when they’re low on funds to loan out. Consequently, you might be able to score a much higher rate than usual.


Disadvantages of Certificates of Deposit:

  • Your money is locked in during your term. If other investment opportunities come up, interest rates rise, or you need access to your funds, you cannot withdraw the money without incurring a fee or penalty.
  • Inflation causes interest rates to rise. If your money is locked into a long-term certificate, you could lose out on rising interest rates.


Wise Ways to Use Certificates of Deposit

CDs are versatile investment accounts that can earn a good return with no risk. While the higher dividends are nice, it’s the fact that your money is locked in that helps so many members. You’re more likely to achieve your financial goals when you’re forced to save.

Here are several strategies for using certificates of deposit to your advantage:

  • Diversify Investments: A well-diversified investment portfolio is a winning strategy for any investor. Adding CDs to your portfolio during a rising rate environment will yield strong dividends without the market risk.


  • Conservative Investments: If you’re nearing retirement, it might be time to tone down your risk tolerance and move toward a more conservative investing approach. CDs will yield favorable dividends without unnecessary market risk.


  • First-Time Investments: CDs are a great first step if you’re ready to start investing but don’t have the stomach for potential market losses just yet. They teach you to leave your money alone for extended periods of time. This way, it will grow through compound interest.


  • Mid-Range Financial Goals (1 to 5 Years): Because your funds are locked in, CDs are the perfect way to save for future financial goals, such as:
    • A down payment or closing costs on a new home.
    • A college fund for your child.
    • A dream vacation for your family.


We’re Here to Help!

While no one enjoys periods of high inflation, there are opportunities in everything. Right now, savings rates are climbing higher, and certificates of deposit are making a strong comeback. These popular accounts might be the perfect tool to help boost your investment returns without added risk.

If you want to learn more about certificates of deposit or are ready to open an account, we’re here to help. Call, chat, text, or stop in! Our team is available M-F, 9am-4pm ET. (315) 671-4000.



Each individual’s financial situation is unique and readers are encouraged to contact the Credit Union when seeking financial advice on the products and services discussed. This article is for educational purposes only; the authors assume no legal responsibility for the completeness or accuracy of the contents.