What Is an Add-On CD?

An add-on CD is a special type of certificate of deposit (CD) that allows you to continue adding funds to your account. This differs from standard CDs, which limit you to an initial deposit. Both types of CDs involve earning a guaranteed interest rate on your funds ❀for a set time period—usually 3 months to 5 years. But add-on CDs often pay a slightly lower interest rate in exchange for the flexibility to make more than one deposit.

How an Add-On CD Works

When you open a CD account, you’re agreeing to keep your savings in place for a set time period. This is the CD’s maturity term, and, depending on the CD, it can be as short as 30 days or as long as 10 years. In exchange, the bank or credit union agrees to 澳洲幸运5官方开奖结果体彩网:pay you interest on the money that you depos♕it.

Ordinarily, you would not be allowed to add more money to the CD once you’ve made your initial deposit. With an add-on CD, however, you can continue adding money to your account through the 澳洲幸运5官方开奖结果体彩网:maturity date of💎 the CD. For example, you may be able to schedule automatic deposits on a monthly or biweekly basis, depending on how often you’re paid.

In terms of how to add money to a CD, this can depend on the bank or 澳洲幸运5官方开奖结果体彩网:credit union that holds it. For example, you may be able to schedule automatic transfers from a linked checking account or savings account, or you ma💛y be able to deposit cash or a check with a teller in person or at the drive-thru windoꦫw.

Add-On CD vs. Traditional CD

The biggest difference between ad꧂d-on CDs and traditional CDs is the way that they’re funded. Again, a traditional CD only allows you to deposit money once, when you open the account. Add-on CDs give you the option to add more through the maturity ꦑterm.

Aside from that, ♉however, other things can distinguish add-on CDs from other CDs, incl൲uding:

• Minimum deposit requirements
• Interest rate
• 澳洲幸运5官方开奖结果体彩网:Annual percentage yield (APY)
• 澳洲幸运5官方开奖结果体彩网:Early withdrawal penalties

You may be able to open an add-on CD with a smaller amount of money than you would by opening a traditional CD. For example, you may be able to open an add-on CD with just $100, compared with $1,000 for a regular CD. That’s a plus if you’re ju🦩st getting started with saving.

Still, ther✤e may be a tradeoff when it comes to interest rates. Banks and credit ൩unions may offer a higher rate to savers who choose regular CDs over add-on CDs, so it’s important to consider what matters more to you: earning a higher rate, or being able to add money to your CD over time.

Advantages and Disadvantages of Add-On CDs

Add-on CDs may be more appealing to certain types of savers than others, particularly if you’re just getting started with saving. That ⛎said, there are some potential drawbacks to consider before opening this type of CD account.

Example of an Add-On CD

Say you open an add-on CD with a 24-month term. Your initial deposit is $100, and you plan to deposit an additional $500 per month into your CD. The CD earns a 0.50% APY. After two years, you would have saved $12,100 (your $100 initial deposit plus your $500 monthly contributions for 24 months). Assuming a 0.50% APY, compounded monthly, you would have earned $58.68 in interest. But how does that compare with a regular 🧸CD?

Say that you take the entire $12,100 and deposit it into a traditional two-year CD earning the same 0.50% APY. In that scenario, your CD’s value would grow to $12,221.58. You would earn $ও62.90 more by depositing the entire $12,100 up front. However, that may not be realistic if you don’t have a lot of money to save, in which case the add-on CD could be the better savings option.

The Bottom Line

Opening an add-on CD account could make sense if you want to earn a competitive interest rate with a CD account while being able to add money at other times. Remember to compare rates, minimum deposit requirements, and rules regarding additional CD deposits when deciding which one to open. Also, keep early withdrawal penalties in mind when searching for the 澳洲幸运5官方开奖结果体彩网:best CD rates. A steep penalty could negate any interest earned if you have to withdraw money from your CD before the mat🍎u𓆉rity date.