Question

Beth and Mark would like to put some savings in the bank. They most likely will not need this money for 4 years, so Beth wants to put it in a four-year CD. Mark wants to put the money in a passbook savings account. What is the advantage of a CD

Answer 1

Quite often, the CD will earn more interest—even if you have to pay a penalty for early withdrawal.

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For example, my local credit union offers 0.10% interest on passbook savings and 1.46% interest on a 4-year CD. One of my local banks offers 0.01% interest on passbook savings, and 0.60% on a 4-year CD.