Types of Certificate of Deposits

For anyone who is interested in saving money, there are a number of options for your money. You can simply deposit it into a savings account, where it will be easily accessible and return low interest on your money. You can also place it into a money market account, where your money will be less accessible but the return on your money will based on a much higher interest rate. Certificate of deposits are another option that you have for your money, but they operate slightly different than a savings or money market account.

A certificate of deposit is basically a certificate the bank gives you in return for you depositing your money into their accounts. These certificates come with a certain amount of time that has to pass before you can get your money back. Some certificate of deposits last for 3 to 6 months, and some last for 1 to 5 years. The interest rate that the bank offers is a fixed rate, meaning that your money will earn the same interest every month until the term is completed. That is a good thing in an economy that is constantly fluctuating, and using the certificate of deposits is a great way to guarantee that you will steadily earn money from the money you are saving.

An advantage to using these certificate of deposits is the fact that the interest rates the bank offers you for your money are usually fairly high. All the interest rates are higher than those offered by savings accounts, and some are higher than those offered by money market accounts. Many banks even offer certificate of deposits that have a variable interest rate, or a rate that the consumer can adjust at different times during the term of the bonds. CDs are an excellent choice for your savings, because the money is insured by the FDIC.

Bump-up certificate of deposits lets you change the interest rate of the deposit according to the performance of the money market. The adjustments can be made during the bond's term, and allows you to increase your interest rate if the overall interest rates on the market increase.

Liquid certificate of deposits are perfect for those who need to access their money but still want to earn a good interest rate. There is a minimum balance that needs to be maintained in the Liquid CD, but you can take out money before the bond matures if needed.

Zero-coupon certificate of deposits are interesting, giving a consumer the option to buy discounted CDs to be redeemed for full value upon the maturation of the bond. For example:

A bond's face value is $100, but the Zero-coupon CD allows you to purchase the bond for $80 but redeem it upon maturity for the full $100.

Callable certificate of deposits are CDs that the bank or financial institution can cash out after a predetermined period of time. An example of a callable CD is a CD that matures in six months, but allows the bank to redeem the CD in three months. This is important if the money market is performing poorly, as it lets the bank cash out before the bond matures without being forced to pay the high interest rates.

2011 Best CD Rates are available at ComplexSearch, a blog that tracks the best bank rates. Find out the current Ally Bank CD Rates, Chase, Wells Fargo, Bank of America, etc.

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