Benefits of a certificate in the current financial environment

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November 16, 2023 | Ben Heinze

With significantly higher rates, high inflation and an overall financial environment that has been quite turbulent over the past several years, knowing what the best financial decisions are can be difficult. If you’re in a position where you have extra income after paying your necessary expenses, you may be wondering what the best thing to do with that money is.

Opening a certificate or CD may be a great option depending on your situation. Learn what factors to consider when deciding to open a certificate.

What is a certificate?

Certificates are the credit union equivalent of a certificate of deposit (CD) at a bank. They are a fixed-rate, low-risk savings tool that can be used to help you prepare for your financial goals. They typically offer a higher interest rate than a savings account. Since they offer a fixed rate, you can lock in higher returns while avoiding the volatility of other investments.

When opening a certificate, you’ll select a term period and how much money you want to deposit. Then, sit back and watch your money grow.

Earn more than before

Certificate rates have been on the rise, meaning you can lock in a higher rate than before. There’s no guarantee that rates will change, so now could be a great time to take advantage of the current higher rates.

The Federal Reserve has recently chosen to keep interest rates where they are, which may be an indication the fast rate hikes may be over. Historically, while rates are not as high as they were several decades ago, they are significantly higher than in recent years. If rates go back down, you’ll still earn a high rate if you have a certificate opened.

Avoid stock market volatility

While investing in the stock market is a great idea as part of your overall financial strategy and for retirement planning, it is also subject to high volatility. In the short term, it is not uncommon for the stock market to return less than you could have safely earned with a certificate.

If you have short- or medium-term savings goals, certificates may be a better option than investing in the stock market. If you put your money in the stock market and it proceeds to go down, you may not reach your goal as quickly as you would have if it were in a certificate. Furthermore, since certificate returns are guaranteed as long as you hold it for the full term duration, you can more accurately plan for your financial goals.

Over the past couple of years, index funds such as the S&P 500, representing the largest U.S. companies, have fluctuated up and down. Anyone trying to invest for a short period and needing to withdraw their money may have incurred losses during that period. This is a great example of how putting money towards a certificate can be beneficial, as money put there would have grown instead.

Beat low loan rates

If you previously took out a loan when rates were lower, such as a fixed-rate mortgage or an auto loan, putting extra money you have in a certificate may be worth it instead of paying off your loan early.

Think of it this way: If you have a fixed-rate mortgage at 3%, you can pay less interest overall by paying it off early. However, if you open a certificate at 5% with your extra money instead, you’re making an additional 2% over putting that money towards your mortgage early. You make more in interest through the certificate than you save paying off the mortgage early. This same concept can apply to any other low-interest loan.

However, some people still choose to pay off their low-interest loans early regardless, citing the mental relief that comes from being debt-free. There’s nothing wrong with that decision, and it ultimately comes down to how much you value the feeling of being debt-free.

Safe and insured

Much of the risk from other investments comes from the fact you can lose money on your investment. The stock market, real estate and more can drop in value at any point, leaving you worse off than if you had done nothing at all.

Not only do certificates offer a fixed rate, but federally insured credit unions can help you rest even easier. With the NCUA, your funds are insured up to $250,000. No federally insured credit union member has ever lost one penny of insured savings. If you’re opening a CD at a bank, look for FDIC insurance instead. 

The best financial products can depend not only on your financial situation but also on external economic factors. Currently, higher interest rates make now, a great time to consider opening a certificate and earning a high fixed rate on your money.


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Ben Heinze is a marketing content specialist with a passion for financial education. Instilled with a strong sense of frugality from a young age, he views money as a means to building the life you want, rather than an end in itself. From reading Money Mentor, he hopes you discover new ways money can be used to build your ideal life—whatever that may look like.

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