When it comes to saving money, a traditional savings account isn’t your only option. Term Share Certificates (or CDs), allow you to earn dividends with a fixed interest rate for a specific period of time. Read on to learn how a Term Share Certificate can offer you a structured approach to saving and growing your dollars.
What is a Term Share Certificate?
A Term Share Certificate is a type of savings in which you deposit a certain amount of money for a predetermined period (known as the term) while earning dividends at a fixed interest rate. Term Share Certificates are also known as Share Certificates, Certificates of Deposits, or CDs.
How Does a Term Share Certificate Work?
Opening a Term Share Certificate is simple:
-
Become a member. To open a Term Share Certificate at Peach State FCU, you must be a member. Membership makes you an owner of the credit union.
-
Choose your deposit amount and term. The minimum amount required can vary by terms. Terms may range from a few months to several years and each has a different dividend rate and annual percentage yield (APY) – which is how your money will grow.
-
Earn dividends. Once opened and funds are deposited, your money remains for the selected term earning a fixed rate. Earnings may compound monthly or quarterly, depending on the certificate structure, allowing your dollars and savings to grow securely.
-
Wait for maturity. When the certificate reaches its maturity date, you can choose to withdraw your money or move it into a new certificate.
Helpful Tip: To learn more about how compound interest can grow your savings, check out Compound Interest Explained: The Secret to Growing Your Money or try our Compound Savings Calculator to see how time impacts your savings goals.
What About Early Withdrawals?
Term Share Certificates are intended to hold funds for a set period of time, so withdrawing money early may result in a penalty or the loss of some earned dividends. The exact penalty varies by financial institution and certificate terms.
Before opening a certificate, be sure to:
- Review the account disclosures to fully understand the terms and what to expect if you need to withdraw your money early.
- Avoid placing money in a Term Share Certificate if you may need it for an upcoming expense or will need to access before the specified maturity date.
Are Term Share Certificates Safe?
Term Share Certificates are considered a low-risk savings option as they aren't exposed to market fluctuations. At federally insured credit unions, your money is federally insured by the National Credit Union Share Insurance Fund for up to $250,000. At Peach State, your accounts are also insured for up to an additional $750,000 with coverage by Excess Share Insurance Corporation (ESI), a licensed insurance company, for a combined coverage of up to $1,000,000. This coverage extends to your Term Share Certificate including principal and accrued dividends.
Term Share Certificates vs. Other Savings Accounts
Term Share Certificates – like other savings accounts – are a way to save and grow your money. The key difference between a Term Share Certificate and other savings accounts is the accessibility of your money and how it earns dividends.
Helpful Tip: To learn more about different types of savings accounts and how to pick your perfect match, read our Types of Savings Accounts: How to Pick Your Perfect Match blog.
Are Term Share Certificates Right for Your Financial Goals?
A Term Share Certificate may be right for you if :
- Can comfortably set aside your funds for a set period of time
- Want a secure way to save with a predictable rate and guaranteed return
- Prefer a structured approach to saving
- Are saving for a specific goal with a clear timeline
- Don't need immediate access to your funds
Helpful Tip: Some savers pair certificates with traditional savings or money market accounts. This can help you balance access to your money with opportunities to earn higher dividends.
Strategize to Maximize Your Earnings with CD Laddering
CD laddering is a strategy that divides your savings among multiple Term Share Certificates with different maturity dates. As each matures, you can use the money for a planned expense or reinvest it in a new certificate. This gives you periodic access to a portion of your savings while the rest continues earning dividends.
This approach may be a good fit if you want a low-risk way to save for future expenses, such as education costs or retirement needs. By matching maturity dates to your goals, you can plan when funds become available without tying up all your savings for the same length of time. Keep in mind that early withdrawal penalties may still apply if you need to access your money prior to the maturity date.
Put Your Dollars to Work at A Smart Place to Bank
A Term Share Certificate may be a good option for you, or you may discover pairing it with another savings method is a better fit. The best saving strategy depends on your goals, how soon you’ll need to access your money, and whether you prioritize flexibility or a structured approach to saving.
Whether you’re looking to put your dollars to work or are preparing for a future expense, choosing the right savings tool (or tools) can help you take a big step toward achieving your goals. To learn more about Peach State, and how we can help you reach your saving goals, please contact us or visit a local branch today.
