There are many factors to consider when purchasing a CD (Certificate of Deposit). A CD is an interest earning savings instrument offered by a depository institution that accepts deposits for a fixed amount of time. CD time periods can range from 7 days to 8 years. You can purchase a CD for $100 - $100,000. Some things to remember when purchasing a CD are that if interest rates fall, you will benefit from the return locked in rate assigned to the CD; however, if interest rates rise, you can miss out on greater earnings. Interest on a CD is paid at the end of the designated time period in which you purchased the CD. Take into consideration that if money is withdrawn from a CD before the end of a specified time period, there will be penalties. Before purchasing a CD, be confident that it is ok for you to tie up your funds in this way.

Also, shop around for a financial institution that pays the highest percentage rates. For example, an extra 1% amounts to $20 on a $2,000 CD every year. CDs are a safe way to invest because the federal government insures your money, however, you have to remember that you are letting the bank have your money for a designated period of time.