what exactly is a cd account?

Question

i would like to open a cd account but im clueless about it, is it beneficial ? will it help my money grow?

Answer 1

A "cd", also known as a "certificate of deposit", is a commitment made by the financial institution to you to pay you a certain rate of interest for a certain amount of time. For instance, you give them $5,000 of your money for them to use for a year, and in return, they'll pay you back the $5,000 at the end of the 12 month period with interest. The interest you earn on the cd will be taxable and need to be reported on your tax return for the year in which you earned it.

Having certificates can certainly help your money grow. Right now, the cd rates are actually pretty good (check http://www.bankrate.com for current rates). If your current alternative is leaving the money in a checking account, you should definitely consider a cd as part of your savings plan.

There are lots of other alternative ways to help your money grow, but since you only asked about cds, I'll leave it at that.