Liquid CD offers the convenience of a savings account

When we discuss about certificate of deposit then we must also make sure we make a complete discussion of the different types of CD that is available in the financial market. The certificate of deposit or CD as it is popularly known can be broken down into various types and forms. There are many financial institutes that are offering new types of certificate of deposit to its clients which have larger flexibility for both the institution as well as for the investors.  If we look at the history then we see that the traditional CD has always been the popular choice for the yield or the return that it generated, but in modern times people are choosing other options as well for some flexibility in the entire process. There are different types of CDs that are available and some of them are a follows. 

The traditional CD 

This is the most sought after CD by people today. The traditional CD has certain guidelines for the users that are extremely helpful to customers. The rules allow the customer to deposit a certain amount of money to the bank for a particular period of time at a pre set interest rate. With the end of the time period the customer can either choose to clear all cash for the deposit or can choose to roll it over for another term.

The liquid CD

The liquid certificate of deposit actually allows the convenience of a savings account. Do you want to avail such benefit? This form of the certificate of deposit allows with the opportunity to withdraw cash form the certificate of deposit without penalties. Having said that, there are certain minimum cash balances that are required for the account, but the rate of interest will be higher compared to the money market rate and less than the traditional certificate of deposit for the same term and minimum.

If we go by the federal regulation, no money can be withdrawn under any circumstances without penalty until of course the cash has been in the account for seven days. After the term of the first penalty withdrawal can take place according to the rules and conditions of the bank. Always make sure, before opening an account that you know of all the rules and regulations of the institution pertaining to the first withdrawal of cash from the time of opening of account. It may happen that there are certain limits prescribed by the banks for the number of withdrawal that you can make per term. You will have to make the required judgment about whether to go for the advantage of liquidity or the traditional certificate of deposit.

Apart from the liquid CD there are other types of certificate of deposit available in the financial market and they are;

1. The Bump-up CD
2. The Zero Coupon CD
3. Callable CD.

The bump up CD has certain disadvantages with the interest rates as the initial rate is really low compared to the first two years of the traditional CD. The rate of interest takes long time to rise and hence causes difficulty for customers to recover money.