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CD myths busted: What to know

CDs are a safe and easy way to grow your savings. Getty Images

Some people shy away from certificates of deposit (CDs) because they're considered complicated or outdated financial products. After all, we're all familiar with how checking and savings accounts work, but many people aren't clear on how CDs work.

The truth is that CDs are a simple, straightforward savings vehicle. You deposit your money, and in exchange, the bank agrees to pay you a fixed interest rate over a set period. It's a safe and easy way to grow your savings without any effort on your part beyond opening the account.

Don't let misconceptions about CDs keep you from earning more money on your savings. Below, we debunk common myths about CDs to help you understand them better.

Check out today's CD rates to see how much more you could be earning.

CD myths busted: What to know

You may have heard the following things about CDs. Here's the truth:

Myth #1: CDs don't offer a good rate of return

While CDs won't make you a millionaire overnight, they can offer a higher rate of return than other savings accounts. Generally, the longer the CD term, the higher the interest rate you can earn. And if you shop around, you can find some great deals on CDs with competitive interest rates.

Equally important, CD returns are stable and predictable. Unlike other investments whose value can fluctuate widely (such as stocks), CDs provide a fixed return that stays the same no matter what the overall economy is doing.

Compare current CD rates here to lock in a high rate now.

Myth #2: CDs tie up your money

One of the biggest misconceptions about CDs is that they lock your money away for a long period, restricting your ability to access your funds if needed.

It's true that if you need to withdraw money before your CD's term ends, you may face an early withdrawal penalty. However, many banks offer CDs with terms ranging from as short as three months to as long as 10 years, so if you think you may need funds sooner than later, you can choose a shorter-term CD. You can also ladder CDs of varying term lengths to ensure regular access to your money. Or, better yet, check out these no-penalty CDs to avoid early withdrawal fees altogether.

Myth #3: CDs are risky

CDs are protected by federal deposit insurance the same way savings accounts are. If you open a CD with an FDIC-insured bank or NCUA-insured credit union, your money is safe up to $250,000 per account per institution. This makes them a safe place to park your money while enjoying solid returns.

Start earning returns on your money today! Get started by viewing current CD rates here.

Myth #4: CDs are only for older investors

While CDs have traditionally been viewed as a product for retirees and conservative investors, they can be a wise choice for anyone looking to increase their savings in a safe, reliable way. Yes, they're a good fit for a conservative investment strategy, but they can also provide diversification for young or more-aggressive investors looking to balance risk in their portfolios.

The bottom line

Certificates of deposit provide a low-risk, stable investment that offers fixed returns even in times of financial uncertainty. And in today's high-rate environment, you can lock in great rates for years to come.

Plus, like other financial products, CDs are now readily available online. You can easily shop for the best rates and open an account online from the comfort of your own home.

So, don't let the above myths deter you from exploring all the benefits CDs have to offer. Check out top CD offerings today and start earning more with your money!

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