How a CD can help you reach your saving goals.

Whether you’re working toward the purchase of your first home, a new vehicle, planning for a big life transition, or more, it helps to have a plan in place to reach your goal. And part of this plan should include an account or tool to help you save more, like a certificate of deposit.

What is a CD?

A CD (or certificate of deposit) is a type of savings account where you leave money in the account for a specific time. The amount of time your money stays in the account is called a term. You can choose the term based on your goals. At Lake Trust, our CD terms vary from three months to 72 months.

After the term is up (this is called maturity), you can use the funds in the account for whatever you want. Or you can roll over the funds into a new CD.

Most CDs have a minimum deposit amount of $500 or more to open the account. But some CDs have a much lower minimum balance, like an Aspire CD ($50 minimum deposit) or a Save to Win CD ($25 minimum deposit). You’ll make one initial deposit to open your CD and, unlike a regular savings account, you can’t add additional funds to the account after opening it. However, some CDs, like Aspire CD and Save to Win CD, do allow some additional deposits after opening the account.

What are the advantages of a CD?

CDs usually have higher interest rates than traditional savings accounts, which means you could earn more in your savings without lifting a finger! CD rates are usually tiered, meaning the rate often increases based on how much money you deposit when you open the account. CDs also give you the flexibility to choose a term that aligns with your goals. So, your funds, plus the interest you earn, will be available to you when you need it.

Since you’re required to keep funds in a CD for a specific amount of time, this might be a great option if you’re saving for something in the future and want to remove the temptation of accessing the funds in your account. If you pull funds out of your CD before the maturity date, you’ll have to pay an interest penalty fee (more explained below).

What are the disadvantages of a CD?

As mentioned earlier, you’re required to choose a term when you open a CD. And you should choose this term carefully based on the timeline you have in mind to reach your goals. You can maximize the amount you earn in a CD by choosing a longer term, but you’ll lose the benefits of this account if you pull funds out before the maturity date.

For example, if you choose a 12-month CD but need to access funds in the account after 6-months, you’ll be required to pay an early closing penalty fee. The penalty amount varies on your term. In the example provided, you’d have to pay an interest penalty equal to 90-days of interest.

What happens after your CD matures?

When your CD matures, you have a 10-day grace period to let us know what you’d like to do next. You can deposit the money in your savings account or checking account or withdraw the funds in cash. If you do nothing, the funds in your CD will automatically roll into a new CD.

How do you open a CD? 

You can explore CD options and open a CD online at any time. You can also give us a call at 888.267.7200 and one of our Member Experience Associates can talk through options and help you open your CD over the phone. If you’re planning to open an IRA CD or you prefer to open your CD in person, feel free to visit us at any of our relationship center locations across Michigan.

If you’re not a Lake Trust member yet, you’ll need to become a member and open a Membership Savings with a $5 minimum deposit before you open your CD.

You have the power to achieve your goals. And with positive support and the right tools in place, you can make it happen.