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Here Are Your Best CD Strategies as Rates Rise

With all bonds, risks get greater with longer maturities, because there's more time for bad things to happen and the consequences last longer. High-yield bonds, also called junk bonds, can pay very high yields, but only because there's a much greater risk the issuer will default and not pay investors the interest and principal owed.

So the bottom line is that when interest rates are expected to rise, it's a very tough time to invest in any type of bond, lest a drop in price wipe out all your interest earnings and more.

For now, then, bank savings, because of their guarantee against loss, are not a bad place to put money you may need on short notice. Think safety, not earnings.

Though yields are low, it does pay to shop around, because banks that find themselves short on cash often offer higher yields to lure depositors. Online banks often pay more than bricks-and-mortar banks, because their costs are lower.

If you're looking for a CD, you don't need a local bank, since your money will be tied up for the specified term, making convenience a minor issue. Be sure, though, to look at the early withdrawal penalties. Some banks are actually breaking with tradition and offering penalty-free early withdrawals. That would be nice if you have an unexpected need for cash or find a new CD or other investment that's more generous. You'll probably give up some interest earnings to get this right.

With savings and checking accounts, interest earnings are so low they don't need to be a factor in your choice of bank. Look for convenience, which these days means access to plenty of ATMs that won't charge for transactions.

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