Both of these are safe ways to earn interest on your savings.
A certificate of deposit (CD) issued by a private financial institution offers you a good interest rate in exchange for your agreement not to withdraw your money for a given period of time (typically 6 months, 12 months, 5 years, etc). At the moment you can earn about 5.5% for a 1 yr CD at a reputable bank.
A government savings bond is even more secure, because it is issued by the US Government itself. Like a CD, you earn more interest the longer you leave the bond invested. However, US savings bond offer a lower rate of interest than bank CDs.
There are also government bonds and lots of other types of bonds, but these are more complex investments.
If you are thinking about choosing between a bank CD and a US savings bond, here are 3 simple questions: Will you want to “cash in” the bond within 1-3 years? Do you want to earn the highest rate of interest? Are you confident that your money is safe at the bank where you buy the CD? If you answered ‘yes’ to all three questions, then you will probably find that the CD is more flexible and offers you more earned interest.
Below I have listed two web sites where you can get further information.
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It is the difference between public and private.
The CD is from a Bank and a Govt. Savings Bond is from
the Govt.
The Certificate of Deposit is guaranteed by the bank and then by the Dept. of the Treasury but only up to $100,000.00. Plus,you will have to report having it and pay taxes on the interest accrued for the year.
With a Savings Bond,you’re making a loan to the federal government and there’s no risk as long as the government stays in power.Also you don’t pay taxes on it but you must report it. You just pay taxes on the interest.
Not much, they are both lousy.
Put your money on an online savings account and get the similar APY rate.
You don’t have to pay an fee.
Certificates of Deposit are issued by banks. They have a set number of years that the money will earn a set rate of interest. And there are penalties for early withdrawal. CDs typically have a minimum deposit amount well in excess of the savings bond.
Savings bonds are issued by the Federal government. There are different types of bonds and the rules for interest earning vary for each. You cannot withdraw your money for at least the first 12 months and you may also pay a penalty of three months interest if you cash in before five years. You can buy them for as little as $25 (that would buy you a $25 I bond online, because the minimum purchase offline is $50 and I bonds are sold at face value.) EE bonds have a fixed interest rate (that is, it’s fixed for the life of the bond based on the interest rate at the time of purchase, but the interest rate for new purchases does change twice a year.) I bonds have a partially fixed rate plus a variable rate that will change over the life of the bond. You can find more info online: http://www.savingsbonds.gov
Also, because savings bonds are issued by the Federal government, the government can issue special rules regarding their usage in extreme circumstances. For instance, following hurricane Katrina, they issued special rules allowing people who lived in areas impacted by the hurricane to cash any savings bonds, even those purchased within the previous 12 months.