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Choosing the right CD

Choosing the right CD

Are you looking for a better yield on your savings? Better investment rate for your earnings compared to a revenue market or savings account? A certificate of deposit is what will need to earn benefits for your investment over a short period of time.

So, what is a certificate of deposit (CD)?
A certificate of deposit (CD) is a record issued by the commercial banks where your investment is awarded with fixed interest rates that is determined ahead of time and a fixed maturity date. CDs are the most reliable investment that a person can make.

Common types of CDs that you can choose from
Traditional CD:

If you opt for this CD, you would receive a fixed rate of interest until your savings account is matured. Once the investment period is completed you can either withdraw the money or invest it again in another CD.

Bump-Up CD
This CD gives you a chance to raise the interest rate and allows you to take advantage on the rising taxes. Most of the institutions offer this type of certificate of deposit at least once during term of CD.

Liquid CD
The advantage of this type of CD is that it allows you to withdraw a part of your deposit without paying a penalty. The interest rate offered on this may not be as high compare to the other types of CDs.

Zero-Coupon CD
In this type of CD, you will not be paid any interest rate during the term of CD.

Callable CD
This particular CD can be called away by the issuing bank even before the maturity date is reached. The other reason is to avoid paying the payee a higher rate of CD when the interest rate drops down.

Brokered CD
This type of CD is offered by a brokerage and these CDs carry a higher rate of interest as they compete nationally. Brokerages have access to thousands of banks, including online banks. The risk with this type is that you may tend to lose money if you open an account with uninsured organizations.

Key points to remember
The most important thing to be kept in mind before you start searching for today’s highest CD rates and the best CD rates is the investment time frame. Once this is clear, the process turns out to be simpler and you can decide on a CD by comparing the interest rates and secure the best CD available.

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