|
 Online
CDs. If you are looking for a fixed rate of return and are certain
that you will not need access to your funds, a Certificate of Deposit--CD--is probably a good choice for you. CDs
will give you some of the highest insured returns but will be "locked-in" for the period of the certificate.
If you feel that you need more flexibility with your funds, then you should consider a money market account. The penalties
for early withdrawal from Certificates of Deposit are hefty, so, in effect your money is locked away for the time
on the certificate. The length of CDs can range from 30 days up to 5 years.
Online CDs tend to have higher interest rates than other "traditional" banks' products. The cost savings
online banks experience by not having to support physical branches is passed on to you in the form of a relatively
higher rate of interest.
Comparing Interest Checking, Money Market
and CD Accounts
|
Benefit
|
Interest Checking
|
Money Market
|
CD
|
|
Check Writing
|
Yes
|
Yes--Limited
|
No
|
|
Fixed Term
|
No
|
No
|
Yes
|
|
Interest Rates
|
High
|
Higher
|
Highest
|
Hints on Certificates of Deposit
|
H
I
N
T
S
|
Minimum opening deposits. Investigate
the various deposit amounts necessary to open a Certificate of Deposit since they will, in many cases, determine
your interest rate. |
| CDs as retirement funds. If
you plan to open a retirement account, make certain that the bank can handle the process. (For example, a traditional
or Roth IRA). |
| Maturity. Find out
the bank's policy regarding maturity. Does the account automatically roll over? What is the maturity notification
process? |
| Liquidity. A good way
to help with the liquidity of your investment is to buy a series of CDs. For example, one 12 month CD, one 18 month
and one 24 month. This means that after the first year, you will have access to a portion of your money every 6
months should you need it. |
|
