CD Cash, Start Your Account Today

By: EconomyWatch Content Team   Date: 25 February 2010

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CD cash is what you put into a certificate of deposit when you buy it and it is also what you get out of it when the term comes to an end. When the CD has reached full maturity, whether you choose a term of six months or five years, then upon completion you want to receive the principal of your money as well as the interest it has earned.

There are many types of CDs but the most popular one to date is the traditional one. However more and more financial institutions are offering their customers non-traditional or special CDs that are flexible enough to fit any budget. Here we look at the traditional CD and the bump-up CD.

When you think of CD cash the first kind of CD that comes to mind is the traditional one. In this case you take a fixed amount of cash and deposit it into a CD account for a specific term. You will then receive a predetermined interest rate once it has completely matured. At the end of the term you are left with two options- you can either cash out your CD or roll it over into another term. Most banks will allow you to add more money to the CD during the term if you so wish or you can do so when you are rolling it over. Early withdrawal will see you forced to pay penalties that could be rather stiff. In this instance you will lose interest and you might even lose some of your principal.

There are federal regulations in effect when it comes to CD cash that impose a minimum early withdrawal penalty. However each individual bank can also impose their own fines and these could be even stiffer. By law the bank must disclose the fees when the certificate of deposit account is first opened.

A bump-up CD makes it possible for you to take advantage of rising interest rates. Let us say that you bought a two year CD. In six months time if the financial institution is offering an additional quarter-point on CDs that are two years in duration then you can speak to your bank about bumping up your rate to get the higher one now presently being offered.

The disadvantage of this type of CD cash is that you may receive a lower initial rate for your two year CD that is of the traditional variety. It is never easy to tell how long it will take interest rates to rise again. Once they do then they will have to make up for the lower-rate portion of the CD term. Always be realistic about whether a bump-up CD is right for you with the interest rate environment of the times or not.


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