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How to Open a Certificate Account in Six Steps

access_time Posted on: May 16th, 2023

Certificate accounts are popular investments that many use to grow their savings. Setting up an account is very easy to do. It can be done in just a few minutes in six simple steps.

What Is a Certificate Account?

A certificate account is a type of investment that is offered by credit unions. Certificate accounts can be used for both short-term and long-term savings goals. A short-term certificate could be used to help you save for new appliances or furniture, for example. You could also open a 60-month certificate to help you save for a down payment on a house.

An important benefit of certificate accounts is that the money you invest will be safe. Certificate accounts are insured by the National Credit Union Administration (NCUA) for up to $250,000. 

Also, unlike savings accounts and money market accounts, which may have monthly maintenance fees, certificate accounts typically don’t have any fees. This lets you keep all of the interest your account earns.

How Do Certificate Accounts Work?

When you open a certificate account, you agree to leave your money invested in the account until the end of the term (the maturity date). Although it is possible to withdraw money early, you will be assessed an early withdrawal penalty fee for doing so. Certificate accounts can have terms as short as three months, but they can also last for several years.

Certificate accounts have fixed interest rates, which are typically higher than savings accounts and money market accounts. They also offer guaranteed returns. This can be helpful in determining whether an account is a good option for your investment goals.

When a certificate account matures, you can withdraw both the money you invested and the interest earned. You can also reinvest the money in a new certificate account.

Why Consider Opening a Certificate Account?

Certificate accounts have several important benefits to consider. They are great options for those who know they won’t need access to the money they are investing until the maturity date.

Higher Interest Rates

Certificate accounts typically have higher interest rates than savings accounts and money market accounts. This makes them a great way to invest for something you want or need such as a vacation, wedding, new vehicle, or college expenses.

Your Money Is Safe

The money you deposit in a certificate account is safe. It is insured by the NCUA for up to $250,000. Unlike the stock market, which could experience volatility, you don’t have to worry about the value of your certificate decreasing.

Fixed Interest Rates

Unlike savings accounts and money market accounts which have variable interest rates, certificate accounts have fixed interest rates. The rate for your certificate account will be locked in when it is opened and won’t change.

Fixed Terms

When you open a certificate account, you agree to leave your money in the account until the maturity date. Different terms are available, which lets you choose the best one for your needs.

Guaranteed Returns

Because certificate accounts have fixed interest rates and terms, it’s easy to calculate how much you will earn. Your return is guaranteed, which helps with budgeting and planning for future expenses.

No Fees

Certificate accounts usually don’t have any fees, which helps you maximize your earnings. You won’t have to worry about some of your earnings going toward a monthly account maintenance fee.

How to Open a Certificate Account

Opening a certificate account is simple and easy to do. The following steps outline the process.

1. Find the Right Financial Institution

Different credit unions offer certificate accounts with different interest rates. Because of this, it’s important to compare rates to make sure you are getting the best deal.

2. Choose the Certificate Type and Term

You may have several different types of certificates to choose from. In addition to standard certificates, a credit union may also offer a Bump-Up certificate, Prime Rate certificate, or other type of certificate. Be sure to carefully consider the benefits of each option before choosing.

3. Choose the Term

The term you select will affect the interest rate. Certificates with longer terms usually have higher interest rates than those with shorter terms.

It’s also important to keep in mind that you won’t have access to your money during the term. Because of this, make sure you have sufficient funds in another account to cover unexpected expenses.

4. Choose How You Want Your Interest to be Distributed

When you open a certificate account, you will be given the option to have the interest you will earn distributed one of two ways—monthly or annually. If you choose to reinvest the interest into the certificate, you can take advantage of compounding interest, which will allow you to maximize your earnings.

5. Open Your Account

When you are ready, you can open a certificate account with your credit union. Opening an account is quick and easy, and it only takes a few minutes. Be prepared to show two forms of identification.

  1. Fund the Account

After opening a certificate account, you can fund it by writing a check or transferring money from another account. Unlike savings accounts, which allow you to make additional deposits, you can only fund a standard certificate account when it is opened. An exception to this is if you have an Add-On certificate that allows you to make one additional deposit.

Certificate Accounts with Belco Community Credit Union

If you are thinking about opening a certificate account, Belco Community Credit Union offers an account with a minimum investment requirement of just $500. Terms of 3-60 months are available.

In addition to our standard certificates, we also offer Add-On, Bump-Up, and Prime Rate certificates. With an Add-On certificate, you can make one additional deposit during the term. A Bump-Up certificate gives you the option to increase your rate once during the term. 

Finally, a Prime Rate certificate has a variable rate that is based on the Wall Street Journal Prime Rate minus 3.25%.

Click on the following link to learn more about our certificate accounts and to see how easy it is to get started.

See Our Certificate Accounts Options & Benefits

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