What is the purpose of a 30 day certificate of deposit?

Question

I read somewhere that a certificate of deposit can help your credit score. What is the purpose of purchasing a CD for 30 days? I have considered purchasing one for my son's college fund, but for years not days and can this help my credit?

Answer 1

I would suppose that the reason there are 30-day CDs is so you can have very liquid assets. If you have cash that you don't know what to do with, buying a CD is always a plus, so that you can at least receive marginal interest.

Be warned, however. The shorter the CD, the lower the interest rate, so in a 30-day CD, the interest rate will be VERY low (a few points at best I would guess ... but still better than nothing).

So, the real answer to your question, in my opinion is so that you can have liquid assets and still receive some interest. Can it help your credit? Sure, but not a whole lot. It certainly couldn't hurt.

Answer 2

I not quite sure about the 30 day certificate of deposit. But I do know that banks will let you take a loan out and they will put the money in a CD and place it on hold until you pay it off. This reduces the risk that they will have to accept. Let say that if you got a grand, they will put that in a CD, then you pay monthly plus the interest that they charge you. The interest is 3% more than what the rate on the CD is. Hope this help some.

Answer 3

Won't help your credit unless you use it as collateral. Might help by showing up as an asset, but same thing basically.

The purpose is to hold cash on a short term basis at a better rate than a savings account. The choice of a CD for a college fund is fine, but be aware that this will not earn very much money. Go to www.treasurydirect.gov (U.S. Treasury web site and buy T-Notes in your son's name (so the interest is in his name and counts on his taxes, not yours). Depending on how much this earns, you may need to file taxes for him.

Alternatively, look into a 529 account (like an IRA for school purposes) or an educational IRA. Both allow you to accumulate money for school without the tax ramifications that bonds, CD's or savings accounts may experience. The other advantage is that 529 accounts can be used by other relatives to gift money for education (i.e. Grandparents or other close relatives).

Answer 4

30-day CD's are for people who have money and want to make more interest than they'd get in a regular savings account, but need ready access to it.  Like, you're going to buy a house and need the money for down payment but you'll have at least 30 days until closing so you can wait for the CD to mature.

As for improving your credit score:  it shows that you have money and do plan with it, but if you go into debt to buy the CD you're just being foolish.

Answer 5

You can't cheat an honest man. Now, why would someone willing to give away 250,000 need your 600? Why not just go ahead and send you the 249,400? That's an idea, tell them to deduct the 600 from the winnings and pay the courier charge directly. Offer them an additional 400 as a bonus for doing it your way.

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