Opening a CD? Make it bulletproof.

By Sabrina Karl

It’s true: Certificates of deposit are among the safest places to save. But that’s not to say they’re risk-free. A few important precautions will ensure the money you sock away in CDs will be there anytime you need it.

CDs are safe because they’re bank savings accounts, not investments that depend on the stock or bond market. When you open a CD, you enter into a signed agreement that stipulates exactly how much interest you’ll earn and on what schedule. Read the deposit agreement before signing and you’ll be safe from surprises.

Choosing the institution for your CD is one area where you should be vigilant, however. Most CDs you encounter will be offered by banks and credit unions that are federally insured: by the FDIC for banks and the NCUA for credit unions.

This is important because even if the bank or credit union fails, your deposits are protected. FDIC or NCUA insurance guarantees your balances up to $250,000 will suffer no loss as a result of the institution’s failure.

But be careful. There are banks and credit unions that hold private rather than federal insurance. Although they provide some protection against failure, the coverage and reliability won’t match the security provided by the U.S. government. So for complete peace of mind, do business with institutions that carry the FDIC or NCUA seal.

For some savers, the $250,000 limit can also come into play. Federal insurance covers that amount per person, per institution, with all deposits held at a bank counting toward the threshold. With amounts above $250,000 unprotected, you’re smart to spread balances among multiple institutions if you’re holding that much in bank accounts.

Sticking to federally insured institutions and staying below the maximum insurance ceiling are easy steps to ensure your CD savings will be positively bulletproof.