I have heard that investing money in cds can make you a nice chunk of change in interests verses just having the money sit in a regular savings account,

So my question is to anyone who has done this do you in the end have to pay so much in Taxes for the interest you made that it makes the deal not worth it? or are taxes low enough that you still get some profit?

I know I can get the info from a bank but I am a little scared that they may want me to just buy the cd telling me the benefits and not the negatives, and that is the reason I ask here first to get an opinion from someone who has done it.

BTW I am thinking small like 500.00 in a 6 month CD,, ALL your HELP is appreciated and welcomed

TIA

oh mann i KNEW my brain was gone! you mean the Certificates of Deposit dont you?

sorry i cant halp on that subject but im SO glad my brain finally caught on to what you was talking about!

Currently you pay taxes on interest that you earn on your savings account, you will also pay taxes on the interest you earn in a CD.

Most banks are paying less than 1% on your savings. Most banks are paying 3.5% and higher on CD's.

Sure, you will pay a little more in taxes but you will be earning more money too. I would highly recommend you investing in a CD vs just keeping it in your savings account.

Check out this website, it has calculators that will show you how much you can earn on a CD.
Calculators for mortgages, savings, small business, credit cards and auto loans by Bankrate

Certificates of Deposit are also great for not touching the money for a predetermined amount of time. If I have money in a savings account, I'm more likely to transfer funds when I want something. When I put the money in a CD, I can't touch it. Also, the rates are higher than a regular savings account. Shop around for rates.

We do it with my dds savings accounts and have been for about 3 years. Each daughter has a savings that she collects money in. When their CDs come up for renewal we pick the term with the highest interst rate and move all but $100 from the savings account into the CD. They only have a few thousand in them, but they earn about $12-$15 interest for about 6 months versus $1-$2. They're great! Once they deposit money they don't take it out, so it's not keeping anything from them. Just be sure you don't need that money for however long you sign up for, cuz there's a penalty for taking it out early.

Lisa

__________________
"It's not having what you want,
It's wanting what you've got"

Actually, an online HSBC savings account is paying 3.5% which is as much as CD's are currently paying.

And the liquidity of the money is preserved with a regular savings account.

Online Savings Account, Learn More, HSBC Direct

Chek your local bank, I just opened a 12 month cd at Wachovia with 4% although the minimum was $1000. Interest gained is definitely more than the taxes paid!

Check out this thread: Where To Put Your Money If It's Just Sitting In a Checking Account - Spoofee Forums : Discuss Coupons, Deals, and More

__________________
My Feedback Profile at MyCoupons
RandomAnny.Com

The rate of inflation is higher than the rate earned on most CDs so you end up paying more in taxes than you earned in interest. If the bank doesn't tell you that they are unethical. But then they make money from your money.

__________________
The political system is broke and it's a joke.

While this is true in some ways, where else are you going to put it. You will lose actual value when inflation goes above interest paid. You will have to pay taxes on any earning but at least you will be making something on it. Putting money in the stock market or commodites is throwing your money away right now. You may not get anything back at all. If you put it in savings with FDIC coverage at least you know you will get back what you put in with a little more. A lot of economists I have read are theorizing we may actually be headed into a deflationary cycle now so that would really turn this around.

I would look into rates at bank rate.com but make sure the bank has FDIC coverage and is one of the stable ones. So many are on the brink right now. The most dangerous banks often offer the highest interest rates due to the high risk. Also check out many of the internet banks. We use ing direct and the regular savings rates are as high as some banks cd's and they are a stable company.

Thanks for all the replies,, your comments suggestions and links have truly helped me out. I was so confused and now I can see more clearly LOL.

THANKS :-)

This is part true, but mostly false. You don't pay more in taxes than you earn in interest on anything. The interest must be reported as income and will be taxed at your marginal rate...which I believe tops out for very high incomes at 36%. You still have more money than if you didn't invest it. Whether you are getting ahead due to the rate of inflation is a different subject entirely. Nothing unethical on the bank's part either.

For FDIC-insured investments, your interest earning opportunities are not big, but certainly better than nothing. If you have trouble saving, a CD may help by tying up the money for awhile.

cj/

__________________
I was walking home one night and a guy hammering on a roof called me a paranoid little weirdo. In morse code. -Emo Phillips