What is meant by liquid CD?

Certificate of Deposits have long been a favorite investment among customers. Traditional CDs have gone a step further to replace the further traditional concept of savings account. People have been favoring CDs for a various number of reasons. One important reason being the rate of interest which is a lot more in case of certificate of deposits than it is for a savings account. Also the fact the CDs are insured, which minimizes chances of incurring a loss has made CD popular. However one primary demerit of certificate of deposits is that the money invested can only be got back when the amount reaches its maturity. Without attaining maturity, the money cannot be withdrawn without paying a hefty sum as penalty. This is where Liquid CDs come into play. Liquid CDs provide you with some access to the money you have already invested. Let us take a look at some of the key aspects of a Liquid CD.

When you purchase a certificate of deposit, it is assumed that the money you have invested is blocked for a certain period of time. In fact the money gets blocked until the investment attains maturity. It means that you do not have access to the invested money until your amount is matured. And in case you are forced to withdraw money in between, it is ensured that you pay some amount of penalty to access your money. But in case of liquid certificate of deposits, you always have the access to a limited amount of cash even without your investment attaining maturity.

The rate of return for a liquid certificate of deposit usually varies between the rate offered by a money market account and the rate offered by a traditional certificate of deposit. The short term liquid CDs are usually of a time period of less than a year. After attaining maturity there is a money transfer window during which the entire money invested can be cashed back. If the money is not cashed back, then as is the case with traditional CDs, the liquid CD gets rolled over into another CD for the same amount of time.

The terms and conditions of liquid CDs vary from one bank to another bank. Usually a liquid CD is of a minimum amount of $5000. The time period ranges from 3 months to 1 year. A limit of $500 is set for periodic withdrawals, and exceeding the withdrawal limit will inflict a penalty on the customer. The rules for penalty are exactly the same as that of the traditional CDs.

The primary and most fundamental benefit of a liquid CD is that the rate of return offered by a liquid CD is more than that offered by a savings account. It is a good choice for people who want to invest some money and simultaneously want access to some part of their money in the meanwhile. Another benefit of liquid CDs are that, they being insured by FDIC, there is very little chances of incurring a loss.

The withdrawal permission from liquid CDs ensures that you get the maximum benefit of the present interest rates of the market.