When does a certificate of deposit make financial sense?

There are three major types of cash savings accounts: the certificate of deposit, the money market or high-yield checking account, and a traditional savings account. CDs are the most restrictive but offer the best rates. Money market accounts and no-penalty CDs fall somewhere in between, and a traditional savings account offers the lowest rate and the greatest access to funds. Naturally, the biggest question in choosing an account is how soon you may need your money back. If you are hit with an early withdrawal penalty, you may lose the value of the higher interest rate and then some. If you have more to invest, you can overcome the liquidity issue of CDs by employing a ladder strategy, where you purchase certificates on a rolling basis so that one is always maturing soon. Finally, even though a CD is a deposit account, you won't be able to make regular, ongoing deposits as easily as you could with a savings or money market account. CDs may also impose minimum deposit limits, making them less accessible to those with inconsistent or lower savings levels.

Different types of certificate of deposit products

What to remember when choosing a certificate of deposit product