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6/1/2018

Why You Should Choose a 1-Year CD

One year. Twelve months. Three-hundred-sixty-five days. A lot can happen in a year. Interest rates can dip. The stock market can fluctuate. If you have money to put away for this amount of time and want to keep your funds safe and growing, a 1-year certificate of deposit (CD) just might be the perfect savings product for you.

What is a CD?

A CD is a savings product known as a time deposit account. When you open a CD, you invest a fixed amount of funds for a specific time period (your term) in return for an interest rate that is typically higher than a traditional savings or money market account. Your interest rate is locked in for the term and you will be unable to access your money penalty-free until the CD's maturity date. CIT Bank offers CDs with terms ranging from 6 months to 5 years. A 1-year CD is a 12-month investment.

What happens if the 1-year CD rate changes?

A 1-year CD isn't for everyone, but if you are looking for a stable, short-term investment and don't require liquidity, there are many benefits to this savings product:

  • Interest rates are generally higher than savings and money market accounts
  • Earnings are predictable  

What happens at maturity?

At maturity, you have the option of rolling over the CD to another CD for the same term or a different term, or you can cash it out.

What are some of the disadvantages of a 1-year CD?

A 1-year CD can be a smart choice for reaching your financial goals, but it does have some drawbacks. Keep in mind the following before opening a CD:

  • CDs are not liquid and accessing funds before the CD's maturity date will result in penalties.
  • CDs with terms longer than one year will offer higher interest rates.
  • During the term of your CD, interest rates could increase.

When is a 1-year CD right for you?

A 1-year CD could be a great option for you if:

  • You won't need access to your money for one year.
  • You would like to earn a higher interest rate than a savings or money market account.
  • You want a safe, FDIC-insured investment protected from market fluctuations.
  • You are saving money for something special that is at least a year away. For example, maybe you are planning to take a vacation, buy a car, or do some work on your home.
  • You want to park your money in a place where you won't be tempted to spend it.

How to choose the best 1-year CD account

With so many financial institutions offering 1-year CDs, deciding which one to trust with your money can seem overwhelming. Here are some things you should look for when comparing your CD choices:

  • A competitive 1-year CD rate
  • Low minimum deposit
  • No account opening or maintenance fees
  • Daily compounding interest
  • A bank that is well-respected in the industry and offers excellent customer service

Enjoy savings growth and security

A 1-year CD provides a good return on your investment in a short amount of time. Your funds will be unaffected if CD rates decrease, so you'll be able to continue moving toward your savings goals.

Learn more

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