How a Certificate Of Deposit Can Help You Save for Your Business Goals

You work hard to grow your business and increase profits, so sometimes it's nice to sit back and let your money work for you. One way to do that is with a certificate of deposit.

What is a business certificate of deposit?

A business certificate of deposit, also known as a CD, is a type of savings account offered by a bank or financial institution. The account earns a fixed or variable rate of interest that is typically higher than you'd earn from a traditional savings account. In exchange, you agree to leave your deposit untouched for a set period — from as little as seven days up to five years or more.

On the agreed withdrawal date, known as the maturity date, you can withdraw your money, plus interest earned. You can also choose to roll your money over into another CD – either at the same bank or a different financial institution.

If you need to withdraw your funds before the maturity date, the bank will deduct an early withdrawal penalty from your deposit.

Benefits of a business CD

To help you decide whether a CD is right for your business, consider the following benefits:

CDs offer fixed interest rates.

Financial markets can be volatile and the returns on certain investments can be unpredictable. With a CD, you can lock into a fixed interest rate for the CD's entire term. Your money will grow dependably courtesy of steady interest rates, regardless of any interest rate increases or decreases while you own the CD.

CDs offer better returns than a savings account.

Savings accounts and CDs both put your money to work for you by allowing you to earn interest on your extra cash. However, the annual percentage yield (APY) on a CD is generally higher because you agree to keep your funds in the account until the maturity date (or pay an early withdrawal penalty).

CDs are a low-risk choice.

When you invest in things like stocks, cryptocurrencies, startup ventures, or real estate, you risk that investment losing value. In some cases, you could lose all of the money you've invested.

The benefit of CDs is that they are insured by the Federal Deposit Insurance Corporation (FDIC), an independent agency of the U.S. government. This means that even if the bank holding your CD goes belly up, the federal government will reimburse you, up to $250,000 per account holder.1

No matter what happens to your financial institution, your money is protected.

CDs offer a variety of maturity dates to match your needs and goals.

Typically, the longer your CD's term, the higher your interest rate will be. Yet sometimes you don't want to have your money tied up for years on end or risk paying an early withdrawal penalty.

That's why CDs come with a variety of term lengths. Whether you're saving to buy a new piece of equipment in a few months or planning on keeping your money invested for the long-term, you can find a CD with a maturity date that aligns with the financial goals of your business.

What to know before opening a business CD

If you're considering a CD, check your bank's offerings and make sure you fully understand the terms. Here are a few questions you should get answers to before deciding:

What is the CD's maturity date?

What is the interest rate or APY?

Is the interest rate fixed or variable?

How much is the early withdrawal penalty?

What is the minimum deposit?

Is the CD FDIC insured?

What happens at the end of the CD's term?

How often will interest be credited to my account?

If you're looking for an opportunity to decrease your investment risk while watching your money grow, a business CD might be a good investment. To learn more about our CD rates and terms, make an appointment at your local Synovus branch.