These CDs can take a big bite out of your savings. Why? They charge whopping penalties for early withdrawals. But they also come with a higher rate of return.
For example, a bank in Bethesda, Md., charges 24 months' worth of interest for early withdrawals on a five-year CD with an interest rate of 2.47 percent, jeopardizing your principal investment. According to Bankrate, typical early withdrawal penalties on CDs with one-year maturities or less are much lower -- six months in interest.
"Also 92 percent of the banks will dip into your initial investment if your interest earnings don't cover the penalty," says McBride.
He advises looking at no-penalty CDs instead. No-penalty CDs allow money to be withdrawn without penalty, and they offer the consumer liquidity and convenience. The drawback is that often the interest rate is considerably less than you'd get on a regular CD of the same term.
"At some point, interest rates will move up," he says. "Then, you'll be in a better position."