Add on Cds: What are add on cds anyway? Introduction:
Although CD rates are low right now, they are still wonderful investments that are reliable and safe. Investors want to get their money’s worth out of every investment so that they can earn as much money as possible. Some CD options offer investors a great deal of flexibility in their investments. Add-on CDs are one of those investment options. Add-on CDs offer investors freedom to decide how they want to invest their money from month to month. There are so many options for investing in CDs. It is easy to see why investors trust this investment type for their money.
How do Add-On Certificate of Deposit CDs Work?
Add-on CDs are special kinds of investment options that allow investors to meet their savings goals very quickly. The option generally requires that investors set up an automatic deposit from savings or checking accounts. The withdrawal is taken on a monthly basis, and the minimum is usually $50 per month. Investors may also have the option to add extra money to the add-on CDs at any time that they want. Add-on CDs usually have 1-year CD terms, but there are options for investments of up to 60-months in certain locations. Investors have the option to invest money according to their personal needs.
Advantages of Add-On Certificate of Deposit CDs
- Investors may be able to add additional funds. Traditional CDs do not allow investors to add money to the account. Once they invest money and open the CDs, investors are locked into the agreement until the maturity date. Investors have the freedom to increase their account balance at any time with add-on CDs. They may decide to add an extra $100 this week and an additional $500 next week if they choose. There is no penalty to add money, and investors can do so as they desire.
- Investors control their investing. Investors just need to have a plan in mind when they open their CDs. The great thing about add-on CDs is that if the plan changes so can the deposit amounts. If investors know that they want to make a large purchase in the next year, they can add money to reflect the plan. In months that investors have unexpected expenses, they can invest smaller amounts of money into their add-on CDs.
- Investors can withdraw interest without penalties. Investors have the option to receive their interest on a monthly or yearly basis, and they do not have to worry about incurring penalties in the process. This option may be particularly beneficial to investors with large sums of money invested in add-on CDs. They may receive a substantial gain each month or each year, depending on the amount invested.
- They are great investments for long-term or short-term investors. This investment opportunity can benefit all investors. Add-on CDs can help parents save money for their children to go to college in 10 years or purchase a new motorcycle in one year. Add-on CDs are better investment options than traditional CDs, and investors have the freedom to change their wants and needs as often as they choose.
Disadvantages of Add-On Certificate of Deposit CD
- They require a minimum daily balance. One of the drawbacks is that investors must keep a minimum daily balance. The minimum amount varies by financial institution. Many require a minimum deposit of at least $500. The penalties vary by financial institution. Some require investors to convert the CDs to savings or checking accounts if the accounts do not keep the minimum balances.
- They may require automatic monthly payments. Investors who do not have checking or savings account may not be able to benefit from add-on CDs. The accounts are set up to withdraw a fixed amount of money from the accounts each month for the length of terms.
- Add-up CDs are not beneficial when rates rise. Investors have a fixed rate for the terms of the CDs. Rate increases may cause investors to lose potential interest until the maturity date.
- Add-up CDs may have a limit on the additional deposits. Some financial institutions limit the additional deposits to the amount of the initial deposit, and others limit the number of deposits over the terms.
Investors must also consider that they may not get the best rates on add-on CDs because they have the option to add money to the account according to their agreement with the financial institution. These investment types can create an enormous amount of wealth if investors plan accordingly. Add-on CDs give investors more freedom than traditional CDs do.