A simple guide on liquid CDs

If you are choosing to purchase CDs with your spare money rather than letting it rest in your savings account, you probably are looking for higher rates and safety too. With so many CDs in the market, each allowing a different level of flexibility, making a choice may be quite challenging. Here is a guide on Liquid CDs to help you know if this is the plan you are looking for.

While thinking of liquid CDs, you must know that you have to make a tradeoff between interest rates and more flexibility. With this kind of CD, you do not have much to gain in terms of interest rates since the rates they offer are not on par with other CDs. This is because this plan gives you more flexibility with your investment.

While other CDs involve a penalty when you want to withdraw within the maturity date, liquid CDs are not so. They give you the flexibility to pull out money at any point of time. This can be quite misleading since there are federal laws that you must comply with. As per the law, you cannot withdraw money within 7 days of purchasing a CD. Due to this restriction, you will have to wait for 7 days before making the first withdrawal at least. So though the liquid CD does not require you to abide by a locking period, you will have to worry about such issues.

A point worth highlighting regarding Liquid CDs is that they have no cap on the number of withdrawals you will be allowed to make. This is what many people appreciate about this CD. This rule may be slightly different based on the financial institution you purchase your CD from. Look out for one that gives you maximum flexibility on the number of withdrawals you can make.

Anyone who reads about easy withdrawal and no locking period will be excited since this CD gives the required level of security in reaching your money when in need, but you have to pay a price for getting this. You will have to sacrifice the higher interest rate the money could have earned you, had you invested in another plan. Almost all CDs offer better rates than Liquid CDs.

The only way you can decide if Liquid CDs are best for you is by drawing a financial plan for yourself. Also, you must try to think of how you want to invest your savings based on your priority. While some people are content with their money being easily available, some others are more interested in seeing their money grow through higher CD rates. You will have to know which weighs more for you so you can be sure of your decision.

Though Liquid CDs allow multiple withdrawals, they require you to maintain a minimal amount as the balance. This must be accounted for during your planning. All said and done, there will be minor changes with respect to rules and restrictions on the CD from one financial institution to another, so read the documents before you sign on the dotted line.