No-risk certificates of deposit (CDs) go by many names in the banking industry. They are commonly called no-penalty CDs, risk-free CDs and liquid CDs among other things. Despite their different names, however, they all fit a general model. These CDs offer increased investment flexibility by waiving the penalties for early withdrawals.
Conventional CDs deter customers from withdrawing money before the CD matures by imposing heavy interest penalties, severely limiting the liquidity of the product. No-risk CDs minimize or eliminate this problem. The downside is that these CDs typically offer a lower interest rate than a comparable conventional CD.
Depending on the current rate trend, no-risk CDs can serve different purposes in your portfolio. When rates are rising, they offer the ability to withdraw funds and reinvest at higher rates before maturity. When rates are falling, they provide the safety of a guaranteed rate with the flexibility of a savings or money market account.
Terms and stipulations can vary significantly among banks, so it's wise to shop around. Some banks offer an unlimited number of withdrawals, and other banks only allow one or two. Most banks require higher minimum deposits on no-risk CDs, but these minimums tend to vary by institution. Search BankingMyWay's CD section for a huge range of offers and rates from banks in your area.Here's a few no-risk CDs available for consumers today. PNC Bank's (PNC - Get Report) no-risk CD, called the "Ready Access CD," only requires a $1,000 deposit. This CD has two terms--3 months and 12 months. The 3-month CD currently offers a .60% interest rate, and the 12-month CD offers 1.1%, while comparable-term regular CDs at this bank offer .75% and 1.24%, respectively.