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Maximize Your Savings with O1ne Mortgage

If you’re seeking a way to enhance your savings, a certificate of deposit (CD) could be a great option. CDs offer a solid return in exchange for keeping your money in the account for a set period. At O1ne Mortgage, we can help you understand how CDs work and how to calculate your potential returns.

Understanding CD Accounts

Banks, credit unions, and other financial institutions offer CDs with various terms, minimum deposit amounts, and interest rates. Typically, the longer the term, the higher the interest rate and earnings. However, some institutions may offer promotional rates for shorter terms.

CD terms can range from one month to ten years, with some requiring no minimum deposit and others requiring amounts between $250 and $2,500.

Interest Rates for CDs

When selecting a CD, pay close attention to the annual percentage yield (APY), which indicates the interest you’ll earn over a year, including compound interest. For example, a 4% APY means you’ll earn 4% of your total balance annually. Compound interest can be added daily, monthly, quarterly, or annually, but is usually done daily or monthly.

Reasons to Open a CD

Consider opening a CD if you want to:

• Benefit from higher interest rates compared to traditional savings accounts.
• Build savings in a low-risk, federally insured account.
• Achieve short-term financial goals like saving for a down payment, home renovation, or vacation.

It’s best to invest in a CD only if you don’t need the money before the maturity date, as early withdrawals often incur penalties.

Calculating CD Interest

To calculate the compound interest for a CD, you’ll need the principal amount, interest rate, compounding frequency, and CD term. Use the formula:

A = P(1 + r/n)^(nt)

Where:

• P is the principal (initial deposit)
• r is the annual interest rate (as a decimal)
• n is the number of times interest compounds per year
• t is the time in years
• A is the total amount at the end of the term

If math isn’t your strong suit, online calculators can simplify this process.

Boosting Your CD Yield

Here are four ways to increase your CD’s APY:

1. Look for a High APY: Compare APYs across various institutions, considering term lengths, deposit requirements, and fees.
2. Deposit More Money: A larger initial deposit can yield more interest over time.
3. Hunt for Promotions: Some institutions offer limited-time promotions with higher APYs.
4. Seek Out Relationship Bonuses: Existing customers may receive higher rates.

The Bottom Line

CDs can offer attractive returns, potentially more so than traditional savings accounts. By understanding the terms and calculating potential returns, you can enhance your savings strategy and achieve your financial goals.

For any mortgage-related needs, call O1ne Mortgage at 213-732-3074. We’re here to help you make the most of your savings.

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