CD Compare, Rates and Terms

By: EconomyWatch Content Team   Date: 25 February 2010

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Traditional CDs are the most common and the most popular of their kind but have you ever thought of doing a CD compare of other types? You might be surprised to discover that there are plenty of options available to you and some may be more to your liking than the traditional variety.

A liquid CD allows you to take out your money from a CD without having to cope with a penalty. In most cases however you must maintain a minimum balance in your CD account at all times to qualify for this privilege. The interest rate paid out on a liquid CD is most likely to be higher than what the financial institution’s money market rate is but it is often lower than the traditional CD that has the same minimum and the same term.

If you do a CD compare and like the idea of a liquid CD then it is important that you find out how long you must wait after opening the CD account to withdraw money from it. The federal laws stipulate that you must wait seven days before you can withdraw money without incurring a penalty. However each individual bank has the right to set its own penalty-free withdrawal for any number of days or weeks beyond the seven day period.

When it comes to a liquid CD you also have to ask yourself how many withdrawals you can expect to want to make. When you look at it this way you must do a CD compare by weighing the convenience of the liquidity against the return you would make. Compare this to the return you would receive if you did not decide to purchase a liquid CD.

Zero-coupon bonds are well known to seasoned investors but there is also such a thing as zero-coupon CDs. As is the case with the bonds you purchase, the CD is what is known as a deep discount to par value (in other words, the amount of money you will receive for the CD once it matures). The word coupon may seem like an odd word to use in the investing world. What it makes reference to is an interest payment. A zero-coupon means that the payments come with no interest.

The down side to this you will see when you do a CD compare. During the term of the CD you will not receive any interest payments because your money is being invested. However this is still income you are earning and therefore you must pay taxes on it every year when tax time comes around.


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