Everything you need to know about a Liquid certificate deposit
A certificate of deposit is an investment instrument which gives a lot more returns than a standard savings bank account. The reason for this is that when you deposit money into a certificate of deposit, you cannot withdraw it before the maturity date. If you do so, you will have to incur penalties which may be very hefty and will result in you just getting back your principle amount without any interest.
A liquid certificate of deposit aims to avoid such a situation. It will allow you to draw out your money before the maturity date mentioned on the certificate. But again, it will not give you complete access to your money. It will allow you to take a certain minimum amount without penalty. This minimum amount has to be decided when you buy the certificate from the financial institution.
This certificate has a very short maturity period. It is usually around one year for most CD’s, where as for traditional CD’s the maturity date may even be five years from the date of purchase. After it matures, you can withdraw the whole amount without penalty during a certain window of time which might be around a month. But if you do not withdraw the amount in this window, the certificate will automatically be renewed for another term along with the interest amount.
There are also other benefits or in other words features associated with liquid CD’s. You can withdraw a certain amount which is usually ten percent of the total deposit every month. If you withdraw more than this, you will incur a penalty. You can also deposit money into the CD. Hence it almost works like a money market account; the only difference is that there is a limit on the amount you can withdraw per month. If it is a large CD, this really makes sense because you wouldn’t need more than the minimum unless it is an emergency or crisis.
The major benefits of a Liquid CD are that you can withdraw money whenever you want. It is particularly of use to people who do not have a steady income but want to save money all the same. Retired individuals can access their savings during a medical emergency without being penalized for the same. Besides, it is also insured by the FDIC or the national credit union authority for credit unions. This ensures that the money is safe no matter what the state of the economy actually is.
Another brilliant advantage of getting a liquid certificate of deposit is that you can move your funds based on the market situation. If the interest rates given by the liquid certificate of deposit are lesser than the current market rates, you can easily withdraw the amount and invest it somewhere else for a higher rate. You can also do vice versa if you find that you have a lot of cash lying around which is not working for you. This way you can be on your toes and make maximum use of your funds.
