Stock savings certificates are an excellent savings option. They are NCUA insured, which gives you peace of mind knowing your deposits are safe. They have a better dividend rate than a savings account and are generally safer than the stock market.

Before you freeze your money, however, there are a few questions you might want to answer about your financial priorities. It’s not just about the rate – there are many other things to consider.

1. What am I saving for?

You can’t control the dividend rates offered by financial institutions, but you can control the duration of your investments. Think about when you might want to make withdrawals. It is far from the end of the world if you go wrong, but you will have to pay a small penalty to withdraw your money before the certificate expires.

If you’re saving for a rainy day fund, you may need that money very quickly. It is best not to lock yourself into a long-term commitment as you will need the flexibility. A short-term certificate, such as one for six months, has very small penalties associated with early withdrawal. Waiting a few months to finish paying an emergency expense is much more feasible than waiting a few years.

If you have a more flexible goal, like a vacation or a home, consider getting a long-term certificate. A five-year tenure earns a better dividend rate, and you can postpone your vacation or house hunt until you have the money to pay for it. A long-term certificate also prevents you from making an impulsive decision. If something seems like a “good deal,” you need to weigh the early withdrawal penalty against the potential savings.

2. What are the penalties?

Early withdrawal penalties make it difficult to impulsively withdraw money from your account, but are not a deterrent if the money is needed for an emergency. However, like most certificate-related factors, they can vary from institution to institution. Generally, the penalty is expressed as the number of months of dividends earned. For the short, those under the year, the penalty is one to three months of dividends. For long-term certificates, the penalties can range from six to 24 months of earnings. Occasionally, institutions may also include a flat fee.

Choose a term that aligns with your need for flexibility. If flexibility is important to you, choosing a certificate with lower penalties will allow you to make withdrawals if needed. If you are confident that the money you are saving will not be needed before the certificate expires, ignoring the terms of the penalty may allow you to secure a higher dividend rate.

3. What kind of certificate is right for you?

The language surrounding the certificates can be confusing. Between jumbo, bump-up and liquid certified options, it can be difficult to figure out which one is right. Here are some of the more common types.

A Jumbo Certificate is a certified account with a higher minimum deposit. Financial institutions offer these to attract large investments. Jumbo options usually start with minimum deposit requirements of around $ 10,000. There are no downsides, other than the fact that your money is locked for the life of the certificate. These are also sometimes called high interest certificates, because they tend to carry a higher dividend rate.

A Bump-up Certificate allows you to take advantage of rising dividend rates. At some point in the term, you will be given the option to change the dividend rate. If you buy a certificate at 1.5% and, after six months, the institution sells the certificate at 3%, you can “raise” your rate to 3%. These certificates often come with slightly lower initial dividend rates to reflect the risk the institution is taking by being flexible on dividend rates going forward.

The opposite of a bump-up certificate is a Callable certificate. This option allows the institution to repay the deposit early and avoid paying dividends on the remaining life of the account. If you buy a Callable certificate at 3% and, after the “call” period has ended, the institution sells certificates at 1.5%, it can repay your principal with the dividends you have accrued up to that point. Since you are taking the risk of dropping dividend rates, these certificates usually have slightly higher rates.

Similar to a Bump-up Certificate, an Additional Certificate offers you the opportunity to make an additional deposit at some point during the term. Even if you don’t get dividends back on this amount, you will earn dividends on the new amount in the future. Additional certificates give you additional flexibility to add to your savings over time.

A liquid certificate is like an additional certificate in that it allows you to make a limited number of withdrawals over the term without paying a penalty. These accounts usually have a minimum deposit and may have a certain amount of time that must elapse before withdrawals can be made without penalty. These accounts are a great way to combine the rates of a certificate with the flexibility of a savings account, but the dividend rates will be lower than other more fixed term accounts.

4. How important is the dividend rate?

The temptation when buying certificates is to jump to the highest dividend rate you can find. A better rate will mean more money, all else being equal. The problem is that everything else is rarely the same.

A tenth of a percent of the dividend rate is unlikely to make much difference over the term. Most institutions will have rates grouped around the same rate, so other considerations should come first. Look at the terms of service, level of support, and flexibility provided by the certificate before trying to earn another tiny amount of dividend.

Most importantly, you need to deposit your money with an institution you trust. Certificate agreements can be cumbersome documents, and many institutions could use that density to hide a clause that can cost you. Doing business with an institution that is there to help you is the best move for your money in the long run.

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