Why It’s Important to Read the Fine Print Before Opening A CD


When it’s time to choose a place to keep your money, so many Americans are quick to jump on the CD bandwagon. Certificates of Deposit are a great form of savings, but they are not always so easy to understand. Fine print is the worst, and no one likes to read it. I don’t have any actual statistics, but I’m certain that if I asked a room full of people how many of them actually read the fine print on smaller documents and things that don’t seem as important to them as other forms, most people would sheepishly admit they really don’t.

Listen, I’m guilty of it. I’ll sign something by scanning it, especially when my kids are with me and I’m in a hurry. I know it’s wrong. I’m married to a banker, and likely the only man in the world who sits down and reads every single second of fine print on any piece of paper presented to him – sometimes twice. I’m positive that he drives me crazy with all the time he takes to read paperwork, but I’m also simultaneously appreciative of the fact that he does that and keeps our family protected. I’m appreciative, and I know that.

When it comes to opening a CD, we always think it’s a good idea. However, you do want to read the fine print since you can end up feeling less than thrilled with your account if you don’t. Here’s why – so you know what to look for in all that tedious jargon.

Early Withdrawal Information

The thing with CDs is that you do have to pay a fee or a penalty should you decide that you want to take your money out early and place it elsewhere or use it. What you don’t think about is the fact that most banks don’t want to talk about things that might make you want to skip out on their accounts, so they’ll gloss over this information assuming that you know that you’ll pay this. What the bank won’t do is really spend much time focusing on those little details. If you want to make an early withdrawal and pay a penalty, you need to gather some very important information ahead of time.

For instance, how long is the process? Is there a limit on what you can take out early? What is the penalty? Is there any other fee associated with this? What do you need to know before you take that money out early to pay for something that might not have been in your plan when you opened this account?

How Interest Rates Change

Some CDs are not the kind that have the same interest rate all the time. Some are variable rate. You might already know this and be all right with it, but you do need to know a few things. For instance, when does the rate change? How does it affect your account? Do you receive notification? Do you have one that has a multi-step program or one that has a bonus rate structure that allows you to see when the rates change and how much they change from the beginning of opening your account? These are fine print items you need to find, and that you need to know.

How Interest is Paid

This is where so many people become upset. You don’t read the fine print and you don’t know how or when you will receive interest on your account. It’s all right in a sense, but you need to know this. Some banks will pay their customer’s CD interest monthly, bi-monthly and even different than that. Additionally, you might need to wait for a check to arrive in the mail, or you might need to look for a deposit into another account that’s predetermined. What you need to do, though, is know this ahead of time so that you’re not upset when you finally realize how you are being paid interest and how it’s coming to you.

At the end of the day, you don’t have to open up a CD with any bank if the terms don’t make sense to you. Your life is not the same as anyone else’s life, which means you don’t need to bother with the little things such as accepting a term you don’t feel is right for you. There are plenty of other deals, terms and accounts that might be elsewhere at another bank that work better for you. Reading the fine print prior to signing anything is the way to find out if the terms meet your needs or if the bank is asking too much of you without providing enough to you in return. Check it out. See what you can get out of it and don’t sign until you know what you want.

Photo by Getty Images


Leave a Reply