How Do CDs Work and What Are My Options?
A certificate of deposit (CD) is a type of savings product that is a low-risk way to grow your money. Interest rates on CDs are often higher than on savings accounts because the money in a CD must remain untouched for a fixed period. They've become an attractive investment option because interest rates on CDs have been higher than they’ve been in over a decade.The types of CDs vary from one financial institution to another but usually take the form of the following two types: Standard CDs and No-Penalty CDs.
Standard CDs
Standard CDs must remain untouched for the entirety of their term, or the money in the account risks penalty fees for early withdrawal. For example, a one-year certificate of deposit that charges an early withdrawal penalty of 180-day worth of interest can charge you the 180 days’ interest if you withdraw funds prior to the 12-month term.
No Penalty CDs
A no-penalty CD is unique because, like the name suggests, a no-penalty CD does not impose early withdrawal penalties if you need to withdraw your savings before the term is complete. In most cases, you can make a no-fee withdrawal after 6 days of opening the account and effective for the lifetime of the CD.
Keep in mind that most no-penalty CDs don’t allow you to make a partial withdrawal. Typically, if you need to access the funds, you have to take all of your money out and close the account.
What are the advantages of a no-penalty CD?
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Keep your money growing and your options open. Check out our No-Penalty CD.
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