Certificates of Deposit | Online Accounts - HSBC Bank USA (2024)

FAQs

What is a benefit of choosing certificates of deposit instead of bank savings accounts responses? ›

A certificate of deposit offers a fixed interest rate that's usually higher than what a regular savings account offers. The tradeoff is you agree to keep your money in the CD for a set amount of time, typically three months to five years.

When you sign up for a CD, you agree not to touch the money for a set period of time but there are always unexpected expenses. If you access your money before the CD's term is up, you'll be charged an early withdrawal penalty, often worth a few months of interest.

One main factor that separates a CD account from a savings account is access to your funds. You can typically access your funds in a savings account more easily than a CD account; however, some banks may charge a fee if too many withdrawals are taken from the account.

This CD will earn $108.33 on $500 over five years, which means your deposit will grow by 21.7%.

Early Withdrawal Penalties

Banks and credit unions often charge an early withdrawal penalty for taking funds from a CD ahead of its maturity date. This penalty can be a flat fee or a percentage of the interest earned.

In addition, the CDs are FDIC-insured up to the statutory limits*, but are subject to the credit risk of the issuer.

Is it better to put money in a CD or money market? ›

Money market accounts provide access to funds and offer interest rates similar to regular savings accounts. CDs earn more interest over time but have restricted access to funds until maturity. Money market accounts are a better option when you need to withdraw cash.

CD drawbacks

There are a few key points to keep in mind before opening one. Lower returns: If you're looking for a way to build wealth, CDs may offer only limited benefits. You could get better returns for your money by putting it into the market and buying stocks, mutual funds, or other investments instead.

CDs offer higher interest rates than traditional savings accounts, guaranteed returns and a safe place to keep your money. But it can be costly to withdraw funds early, and CDs have less long-term earning potential than certain other investments.

Because of the nature of CDs, once you put the money in, it is stuck there until maturity (unless you want to pay a hefty penalty) and you are stuck with the same interest rate. So, if interest rates rise two years after you lock into a five-year CD, you don't get the advantage of those higher yields.

Because CD account holders can't take their money back at a moment's notice like savings account holders can, CDs are more valuable to banks than savings deposits. Banks typically pay CD investors a higher yield in exchange for locking up their money for a set term.

One advantage of a certificate of deposit is that it earns a fixed interest rate for a specified length of time. One disadvantage of a certificate of deposit is that it has a higher interest rate than as savings account, but you must wait until the maturity date to get the money.

CDs can be a safe, secure way to set aside money for your financial goals. A CD may offer a higher interest rate and APY than a high-yield savings account or money market account. Returns are virtually guaranteed and you can easily estimate how much your money will grow.

CD vs.

A CD requires you to lock up your funds for a certain term, and it typically charges penalties if you withdraw your money early, but offers a higher rate. Savings accounts offer the ability to withdraw money anytime, but offer a lower rate.

CDs offer higher interest rates than traditional savings accounts, guaranteed returns and a safe place to keep your money. But it can be costly to withdraw funds early, and CDs have less long-term earning potential than certain other investments.