Invest in some flexible CD options for better returns

Investing in a certificate of deposit has two major concerns for investors – the money cannot be accessed until the term of the CD is over and if there is a hike in interest rate during that term then that is lost income.  Hence most investors prefer to save in the high-interest savings accounts instead of investing in CD’s but they still don’t earn the high returns as that of a CD.  So, it would be wise to consider some of the CD’s that offer high interest rates without the worries.

One such CD is the no-penalty CD and there are several banks that offer the no-penalty CD.  Here, there is no penalty in case you access the money before the date of maturity.  There might be some restrictions that could be applicable to these CD’s such as a particular time period when the funds could be accessed (first withdrawal or the total amount).  These are also called liquid CD’s.  The basic difference with a liquid CD is that the whole amount could be taken out of the certificate at once.  The interest rates on liquid CD are not as good as the traditional CD that comes with the penalty.

The bump-up CD is a good option if you are concerned about the interest rate hikes where you could lose out on income.  AmEx offers 1.55% rates on a two-year CD.  This would seem pretty good for that moment but if the interest rates go up to 2.55% during the two-year term during the lock-in period then it would be another thing altogether.  Hence a bump-up CD helps you to take advantage of the increasing rates of interest.  During the term of a bump-up CD you could take advantage of the hike in interest rates maybe once or twice during the term of the CD.  However, there are restrictions here also and you can only bump up the increase in rates once in every 12 months and the bump-up option can only be availed if the same CD that you possess is now offering the higher rate of interest.

These bump-up CD’s also pays a much lower interest rate than the traditional certificate of deposits.  But this is a sacrifice that one will have to make if they are to enjoy the benefits of investing in a CD while having the option of not tying the money down.  This way one can move the funds to another account which pays a better rate of interest.