Is a CD the right investment for you?

Certificates of Deposit or CDs are a great way to invest your funds to minimize interest rate risk. That makes a CD perfect for the beginning investor who may be risk adverse or anyone who might not need access to their funds for a period of time.

How do CDs work? A CD bears a maturity date and a specified fixed interest rate. The term of a CD generally ranges from three months to five years, although many institutions offer longer term CDs, some up to 10 years. This pre-determined time period restricts CD accountholders from withdrawing money prior to the maturity date. In turn, they are rewarded with higher interest rates than are typically paid on regular savings accounts. It is however, still possible to withdraw money, although this action will often incur a penalty.

If you are considering making an investment, here are a few reasons why a CD could be the right option for you.

Predictable Return: Investors can count on CDs to deliver a specific yield within a specific time. Even if market interest rates fall, your CD rate is guaranteed for the agreed upon term.

Low Risk: Unlike the stock market, if money is deposited into a CD at a credit union or bank, the money is insured by a government agency such as the Federal Deposit Insurance Corporation (FDIC) for banks and the National Credit Union Administration (NCUA) for credit unions.

Better Return: Because CD holders are restricted from withdrawing funds without penalty, CDs are a source of long term deposits for financial institutions. Because of this, financial institutions are willing to pay CD investors a premium rate which typically increases with the length of the term.

Wide Variety: There are a wide selection of CDs available making it easier for you to find a CD that fits your needs. One option available is a “Bump” CD. A bump-up CD entitles the accountholder to take advantage of rising interest rates by providing the option to “bump up” the interest rate paid during the term of the CD. This may be of value if interest rates are expected to rise during your CD term.

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NEFCU, a leading credit union serving all Long Island’s banking needs, is offering two “Fall CD Specials.” Our 20-Month Bump Certificate Account earning 1.25% APY* and our 65-month Bump Certificate earning 1.65% APY*, both which must be opened with new money only, allow you to "bump up" or increase your rate once during the term. These special offers allow you take advantage of rising interest rates without breaking the term of your Certificate and paying a penalty. For information about NEFCU’s Fall CD Specials, available for a limited time, call 516-561-0030 or visit www.mynefcu.org.

*Stated Annual Percentage Yield (APY) for the Certificates listed above is current as of 11/8/13 but is subject to change without notice. A one-time rate “bump” is allowed during the initial 20-month and 65-month terms of the Certificate to the then-corresponding rate in effect on our 2-year and 5-year Term Certificates respectively. A penalty of 180 days’ or 270 days’ dividends respectively will be imposed for early withdrawal, which could affect the principal. At maturity, these Certificates renew automatically as a 2-Year and a 5-year Term Certificate respectively at the APY then in effect, without any rate bump feature. 65-month bump is not available for IRA accounts. Membership eligibility required. Minimum balance requirements apply. New money only.