6 tips for first-time CD shoppers

Don't be afraid of commitment
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Don't be afraid of commitment

You can avoid intimidating early withdrawal penalties. Some banks such as TD Bank offer penalty-free CDs that give customers options to withdraw their funds or take advantage of higher interest rates prior to maturity without additional fees.

"In this environment, customers want their funds as liquid as possible," says Ryan Bailey, senior vice president at TD Bank.

Beth Coggins, spokeswoman for Ally Bank, sees the same trend among Ally's customers who are considering the bank's No-Penalty CD and Raise-Your-Rate CD.

"These products may appeal to customers who want the safety and competitive rates of a CD, but are concerned that they may need to access the money or want options if rates should rise," Coggin says.

While liquidity offers a certain degree of comfort, these penalty-free programs usually mean lower interest returns, says Greg McBride, CFA, Bankrate senior financial analyst.

"Investors need to ask themselves one question: Is the yield you forfeit on the front end more than what you would recoup if you remove it prior to maturity?" McBride says.

As you weigh your options, be sure to list the pros and cons of having more convenient access to your money.




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