Certificates of deposit or CDs for short are short-term money market saving products. Certificate deposit rates of interest, sometimes called the yield, are issued by banks. CD rates on savings are normally fixed interest rates that run for a preset period of term.
The rate money market for CDs is a movable feast. To get the best deal at any point in time you need to use any one of many certificate deposit comparison websites. Where certificate deposit rates will be listed with the best ones at the top and all of the other certificate deposit criteria in a matrix for comparison. Other things to think about besides the certificate deposit rate of interest are the terms and starting dates, the annual percentage yield (APY) and the minimum deposit levels.
Bankrate.com have a nifty CD calculator where you simply enter the figures for the CD you are considering and it returns the value figures for them and you can compare all the rate money market offerings.
‘No-penalty’ certificates of deposit are just what they say they are. They allow the buyer to take out their savings before the end of the term and do not charge them a penalty fee. This gives the CD holder greater liquidity and convenience. At times when interest rates are rising, this is an opportunity to take the profit of better rates.
Of course there is always a price to be paid and the downside of no penalty CDs is that the interest rate is often much less than you’d get on a common CD of a comparable term. But that is not a drawback when you feel sure that rates will rise and you’re OK with the additional cost to take advantage of these types of rate money market.
On the other hand, in a declining rate money market, a no-penalty CD provides the holder with a guaranteed rate and the facility of quick cash withdrawal against, say, bank deposit accounts where the rate can vary. However if a no-penalty CD is what you require, simply because of the safer low risk reassurance that CDs give, and you also want optional cash flow, be sure to check out all your alternatives to ensure you are getting the best deal.
No-penalty CDs come with many pseudonyms and they can vary greatly in terms and conditions, but the basic feature is always the same: You can get at your money without paying through the nose.