Online banking or Internet banking is a very convenient way of managing money, especially if you need to make transfers, check your balance or pay your bills after banking hours. You can print your billing statement in the comfort of your own home. You can access your account anytime and anywhere you may be. Nowadays, you can do almost all your banking transactions online with ease. You can even take advantage of online certificates of deposit.

What is an Internet bank certificate of deposit?

A certificate of deposit (CD) is similar to a time deposit account. With a CD, you acquire a fixed rate over a certain period of time – usually either three months, six months, or one to five years. A CD is designed to be kept in the bank until maturity, which means that the money can only be withdrawn when the time agreed upon has lapsed. There is a substantial penalty if you withdraw before maturity.

Because CDs are kept longer with the financial institutions, you can acquire higher interest rates, especially if you withdraw the money only after maturity. The larger the principal, the higher the interest rate. The longer the term or the smaller the bank, the higher the interest rates, too.

An Internet bank typically informs you of your CD balance periodically. You can instruct the bank to mail you the interest, deposit it directly to another account or add it to your CD account. You can opt to withdraw the whole amount including the interest once maturity is reached, or you can choose to deposit it into another CD account. It is a common practice for financial institutions to automatically continue the CD if there were no prior instructions for the amount to be withdrawn.

The edge the Internet bank CDs have over traditional CDs is accessibility. You can typically view your CD?s performance online anytime you wish, which is not the case with CDs from traditional banks.

By: Damian Sofsian