Secure your funds: stick with plain ol’ certificates

Certificates of deposit (CDs, or just certificates) have many faces, as the New York Times points out.

The story tells how even the plain vanilla certificate become involved in an $8 billion scandal. The thing is, that kind of CD differs from other kinds of CDs.

To start, you have your basic certificate: you give a bank or a credit union money, and they pay you a dividend when the certificate matures. You can’t touch the money until the term is up, however, without paying fees and penalties. They carry virtually no risk because you know what kind of interest your money will earn ahead of time. Even better, the NCUA covers your credit union certificate deposit up to $250,000. American 1 offers these types of certificates, and so do most other banks and credit unions.

After that, things get tricky. There are brokered CDs, where brokers pool investors’ money to get a better return; indexed CDs, that are coupled with “equity index such as the Standard & Poor’s 500 or the Dow Jones industrial average”; and many other types of CDs that offer a variety of returns and security options. Just know that not every certificate is as safe as the certificate of deposit.

Be sure to do plenty of research before you put your money in anything besides a plain certificate.

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American 1 Federal Credit Union

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