One of the safest savings vehicles in the United States is the Certificate of Deposit, or CD. In Canada, the equivalent of a CD is a Guaranteed Investment Certificate, or GIC. And while GICs are just as exciting as CDs (don’t bring the subject up during cocktail hour, in other words, unless you want to get rid of an unwanted company), they do have their place in a portfolio. Here’s what you need to know about them.
Everybody with a savings account is complaining about low interest rates. And they have a point: money market funds are still yielding close to zero, and the best online savings accounts are offering about 1%. Here’s the problem: that APY is a lie. In fact, every APY reported on every savings account and CD is a lie. Worse yet, it’s impossible to figure out how big a lie it is until (cue dramatic music) it’s too late.
A number of financial bloggers and mainstream news outlets have recently noticed something: the early withdrawal penalties charged on long-term CDs are puny. They’re more of a slap on the wrist than a pound of flesh.