A CD is a Certificate of Deposit account that is set up through a financial institution. Basically, this is much like a savings account, but you commit the money to the account for a determined amount of time. These accounts are for people with cash that need a place to store their money and earn interest on it as well. This account is not for cash that you think you will need to use soon. In fact, usually the longer you commit the money, the better the return or interest rate on the account, because the bank has a longer period of time to use the money for other things.

The interest rate is often affected by the length of time the money will be in the account, but is also affected by other factors. The bank also considers current interest rates and the competition from other financial institutions. Some banks will offer excellent rates to build business quickly.

When shopping around for CD rates, check your local newspaper for any special advertisements. Also make sure to meet with area credit unions, which can have very competitive rates. Another thing to consider is consolidation of your assets. If you have several accounts set up through different lenders, you can often pool them together to get an even better rate.

A CD should really be considered if you have cash that you won’t really need for some time. These accounts can help you really earn some interest on your cash, without the risk of traditional stock investments.

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