What are the strengths and weaknesses of a CD?

Answer 1

Strengths of a certificate of deposit (CD) include higher interest rates compared to regular savings accounts and the security of being FDIC-insured up to the applicable limits. Additionally, CDs encourage disciplined saving, as funds are locked in for a set term. However, weaknesses include limited liquidity since early withdrawals often incur penalties, and the potential for lower returns compared to other investment options if interest rates rise after the CD is purchased. Furthermore, inflation can erode the purchasing power of the fixed returns over time.