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jiwonstr · May 27, 2008, 11:45 AM

Hi all,

I have a quick question about CD. I know the type of CD varies by periods (6 mo, 1 yr, 3 yr, so on), but I want to know more about the detail.

For example, I know that if I open up a CD with $1000 with 5% APR for a 1 year CD means I will take $1000 + 5% interest (being $50) at the end of the 1 year period.

My question is:

Can I make monthly deposit into my CDs? Say I open up a 5 year CD and wants to make deposit every month, can I do that? Or do I must leave the initial deposit until the end up whatever term I chose?

I have never used CD before and wants to know If I can fully committed to the system. I'd like to do 3 year CD and wants to make certain deposit every month to make my CD bigger every month and end up getting so much at the end of my CD term.

Please help! Thank you!

Josh,

ScottGem · May 27, 2008, 11:51 AM

You need to ask the bank. CDs have become much more flexible. Some CDs do permit periodic deposits. Also interest is not that cut and dried. Generally interest is paid periodically during the term and therefore compounded, so the actual yield may be more.

Basically you need to shop around.

jiwonstr · May 27, 2008, 12:42 PM

Are there specific name to those "periodic deposit" CDs? I'm having troubling finding what those are called. I don't want to just make initial deposit and let it mature until the term ends. I'd like to build it while it is being matured.

Thanks!

ScottGem · May 27, 2008, 06:14 PM

Just explain to the bank what you want to do and ask what products they have.

Fr_Chuck · May 27, 2008, 07:30 PM

Yes, for years, a CD was just that, you purchases one and it was a set amount, and if you wanted to purchase antoher one, in a few months you bought another one.

Each back will have 100 different advertising names for many of the new products, So you need to go into the bank and talk to one of the reps there.

wingrun · Jun 23, 2008, 12:42 AM

Here's my two cents:

A CD actually is just a certificate of deposit, meaning you only make one initial deposit and your money will be locked in for the length of the term. That is a traditional CD.

Since bank competition has increased significantly in the past 20+ years, each bank has been creating new instruments to accommodate client needs such as yours. If you have a very large fund with a specific bank, they can of course make any instrument you like to satisfy your needs. Otherwise search for other financial instruments that fit your characteristics. I recommend you search the web to find the financial product you request because the chances for a higher rate is much higher if you look online (check bankrate, etrade... ) Be sure you select a company that is FDIC insured though.

As for you example, your rate of return on the $1,000 initially invested with 5% APR would be more than $50 due to compounding. You'll be more like $51.5, might not seem much but never underestimate power of compounding