A closer understanding of the yankee CD’s

In recent times, the CDs are growing in popularity because of the higher returns they offer as compared to other options for saving or investing money. There are various types of CDs that a customer can choose from. While most of them are common all over the United States, the Yankee CDs are limited just to the state of New York.  

A Yankee CD is a kind of negotiable financial instrument. And being negotiable in nature, it can be quite easily traded in the secondary market.

Rates of interest on CDs

The rate of interest earned on the certificates of deposits is mostly of two kinds: fixed and variable. Almost all the certificates of deposit have fixed rates of interest. This means that the investor earns a certain fixed rate of interest for investing in this certificate of deposits. In case of Certificates of deposits with fixed rates, the rate of interest that the investor earns on the invested funds is fixed or constant. Yankee CD is a kind of CD that earns a fixed interest. The CDs with variable interest rates with attract different rates at different points during the tenure of the CD.

Yankee CD is a good short term investment option. It is a perfectly suited investment tool for those investors, who want to invest their funds in a fixed term deposit kind of an account, albeit one that yields good interest. This kind of a financial instrument can be issued by banks, different Credit Unions as well as by brokers. It represents the concept of a time deposit with a certain maturity date.

Investing in Yankee CDs

The concept of investing of funds in the Yankee CD is similar to that of investing in bonds. The only difference being, in case of Yankee CDs, the investor is investing in the money market. And for investing in these, the investor has to first follow the procedure of applying for an account and then depositing a minimum amount of cash in it. Finally, the investor has to wait for the maturity date to withdraw the investment back with an addition of an interest rate on the principal sum. While investing in Yankee CD an investor needs to keep in mind the fact that the deposit cannot be withdrawn before the maturity date. In case a personal emergency arises and the investor intends to the withdraw funds from this CD prior to term maturity, the investor has to pay a penalty. 

The Market for Yankee CDs

The Yankee CDs in the United States are issued by the banks and other financial institutions only in the state of New York. These Yankee CDs are generally availed by the big investors, as the least face value of these investments is about $100,000. While investing in these kinds of financial instruments, the investors must be very careful and ensure that the invested amount stays intact till the date of maturity. This is necessary as withdrawing before maturity date attracts a penalty.