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What Is a Certificate and How Does It Work

Breaking down the basics of certificates, how they work and why they're a smart savings tool.

What Is a Certificate and How Does It Work

When it comes to saving money and growing your wealth, a certificate is one of the safest and most reliable options available. But what exactly is a certificate, and how can it fit into your financial strategy?

In this guide, we'll break down the basics of certificates, how they work and why they might be a smart choice for you.

What is a certificate?

Also known as a certificate of deposit or CD, a certificate is a type of savings account that pays accountholders a fixed interest rate—typically higher than a traditional savings account—in exchange for depositing funds for a specific period of time. This period, known as the term, can range from a few months to several years.

During this time, your money earns interest at a rate determined when you open the certificate. In return for locking in your funds, financial institutions often provide higher returns compared to other savings options.

Certificates are considered low-risk investments because they are insured up to $250,000 per account owner by the National Credit Union Administration (NCUA) or the Federal Deposit Insurance Corporation (FDIC). This makes certificates an excellent option for those seeking predictable returns and security on their savings.

How Certificates Work

1. Choose Your Term and Amount

Start by selecting a certificate and term length that matches your financial goals. Terms can range from short-term options like five months to long-term commitments of five years or more.

You'll also decide how much money to deposit into the certificate. Depending on the financial institution, most certificates have account minimums ranging from several hundred to thousands of dollars. However, with our 12-Month Starter Certificate, you can open an account with as little as $50.

2. Lock In Your Interest Rate

When you open a certificate, the financial institution guarantees a fixed interest rate for the duration of the term. This means your earnings are predictable and unaffected by market fluctuations.

3. Let Your Money Grow

Once your certificate is funded, all you need to do is let your money sit. Over time, it will accrue interest based on the rate and term you selected.

4. Access Your Funds at Maturity

When the term ends, or "matures," you can withdraw your initial deposit and the interest earned. Many financial institutions allow you to roll over your certificate into a new one if you don't need immediate access to the funds.

You can also choose to "ladder" multiple certificates so you always have an opportunity to roll over or withdraw funds at maturity.

Why Choose a Certificate

Certificates can be an excellent savings tool for individuals who:

  • Want predictable returns: Certificates offer guaranteed growth with no risk of losing your principal, making them a great choice for conservative investors.
  • Have a specific goal: If you're saving for a future expense, like a wedding, vacation or down payment, a certificate can help you stay disciplined by keeping your funds locked away.
  • Seek higher interest rates: Compared to traditional savings accounts, certificates typically offer significantly higher interest rates, especially for longer terms.

Things To Consider Before Opening a Certificate

While certificates are a great option for many, they're not for everyone. Here are a few factors to keep in mind:

  • Early withdrawal penalties: Accessing your funds before the term ends usually incurs a penalty, which can eat into your earnings. If you'd like the best of both worlds, our 11-Month No Penalty Certificate allows the flexibility of a penalty-free withdrawal during the term.*
  • Limited liquidity: Unlike a regular savings account, you won't have immediate access to your money.
  • Inflation risk: If inflation rises significantly, the purchasing power of your certificate's returns could diminish.

Is a certificate right for you?

If you're looking for a safe and predictable way to grow your savings, a certificate might be a perfect fit.

At Apple FCU, we offer a variety of Certificate options to suit your financial needs. Whether you're looking for a short-term boost or a long-term savings strategy, we have a Certificate that's right for you.

If you're already an Apple member, you can open your Certificate easily in Apple FCU Online or Mobile App! Click Certificate (New Money Only) or Certificate (New or Existing Funds) under Add a Product in Apple FCU Online or Mobile App, and then click Open next to your desired account.

Not a member yet? Join Apple FCU and start saving smarter today!

*APY = Annual Percentage Yield as of 01/03/2025 for a limited time, 11-month Regular or Commercial No Penalty Certificate; subject to change at any time. Required minimum deposit of $500. A penalty will not be imposed for the first withdrawal, but subsequent withdrawals may impose a penalty. To request your one no-penalty withdrawal, visit any branch or call 703-788-4800. If the Certificate is redeemed prior to the maturity date the following penalty will apply: If the term is over 6 months to 60 months – the lesser of dividends earned since issuance or renewal or 180 days dividends. There is no penalty for withdrawals as a result of the death of any owner. If the Certificate is withdrawn within the 10 days following the maturity date, no penalty will apply. Fees could reduce earnings on the account. See No Penalty Disclosure for complete terms.


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