Certificates of deposit (CDs) are popular products for savers looking to put aside some money for the short term and earn a modest return in the meantime. When you take out a CD, you agree to leave some money in an account for a set amount of time without withdrawing any of it. In exchange, your bank or credit union will pay you an interest rate return on the money that can be higher than that offered on savings accounts.
Nowadays, you can get a CD from hundreds of providers—not just community banks, but online banks as well. In general, the CDs offered by online banks are just as safe as those offered by their giant corporate peers, because all CD accounts are insured by the federal government. That said, it always pays to be wary of scams.
In this article, we’ll explain why online bank CD accounts are safe, but also explain how to spot a scam if you have doubts about the company you’re dealing with.
Key Takeaways
- Certificates of deposit are considered very low-risk investments. They offer a guaranteed return on your money and are insured by the federal government.
- CDs are insured and safe whether you bank with a huge financial institution or a small online bank.
- Online banks offer the same protections for your CD as traditional banks and sometimes better interest rates as well.
- It’s important to verify that an online bank is legitimate, but once you’ve done so you can rest assured that your money is safe in an online bank CD.
