2011 Rising-rate CD survey
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Online CDs: the road to higher yield?

Ask lots of questions
4 of 7
Ask lots of questions

Good online CD deals are about more than high rates.

Terms and conditions, which vary widely, can ding earnings. The CD's minimum deposit may be nothing -- but can be as much as $25,000. Maturities usually range from three months to five years, and can affect early withdrawal penalties.

"As with any CD, verify maturity dates and early withdrawal penalties," McBride says. "Make sure the term of the CD is consistent with your time horizon."

But don't stop there. Find out if your online CD is callable, meaning it can be redeemed by the bank after a no-call window expires. This means you may have your CD yanked before it matures. Rates also can be floating or fixed.

Also, beware of buying a brokerage CD online through the secondary market, though. Brokers can offer good interest rates. But you may lose principal if you sell the CD before it matures. These brokered CDs are issued through banks but are only sold by brokers such as Vanguard or Fidelity. So you may pay a small brokerage fee.

"Many secondary market CDs with longer maturities are callable," McBride says. "Don't chase a few extra basis points by buying a CD with call features that are costly to get out of."




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