Types of CD Accounts: What Are Some of the Most Popular CD Savings Products?

One of the safest ways to save and invest money is to put it into a certificate of deposit account. Many online banks offer high annual percentage yields for these accounts – some of which are even more profitable than a traditional savings account. However, there are different types of CD accounts. Some of them may be better options for you than others.

Here is a quick rundown of some of the more popular types of CDs:

Regular CDs

This name simply refers to the traditional or fixed-rate CD and is the simplest type. You deposit a set amount of money into the account for an agreed-upon amount of time, which can be anywhere from 3-months to several years. These are ideal if you want a fixed rate with limited liquidity. Read the terms and conditions first to determine the early withdrawal penalty should you have to take it all out before the term is over.

Brokered CDs

You purchase these types of CD accounts from an independent salesperson or brokerage firm instead of a traditional bank. These are issued similarly to regular CDs, but they aren’t as straightforward. The good news is that the brokered CDs tend to pay higher APYs, AND you’ll be allowed to sell them on a secondary market. The bad news is that if you sell before the agreed-upon maturity date, there’s a chance you’ll lose money due to fluctuations and changes in the interest rate.

Bump-up CDs

A bump-up CD account is useful because it allows you to switch up to a higher APY during the term duration, rather than having to stick with a fixed-one. For instance, if you put money into this CD and agree to a 3-year term with a 0.80% APY, but rates go up to 1.0% sometime before the 3-years are up, you can request to raise the APY to the higher rate. Not all banks offer this kind of account. Also, the starting APY might be lower than that of a fixed-rate CD.

Jumbo CDs

Suppose you have a significant amount of money to put into a CD account – usually a minimum of $100,000. In that case, a Jumbo CD might be right for you. Just make sure the FDIC or similar entity backs it. These CD accounts have benefits such as a guaranteed return rate and a chance to balance all of your investments. You won’t have to worry about the volatility of the markets.

Here are a few more options to consider:

  • High-yield CDs
  • Step-up CDs
  • No-penalty CDs
  • Foreign-currency CDs
  • Retirement CDs

Now that you know the different types of CD accounts, you might want to start looking for an acceptable bank. CIT Bank is undoubtedly an excellent online bank to choose from. It offers a variety of these accounts, good service, and higher-than-average APY%.

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