A certificate of deposit (CD) is a good way for a person to make a low-risk investment. The current state of the market has made the potential yields from CDs even more attractive. However, while the majority of CDs feature federal deposit insurance, some CDs are more complex and carry a higher risk. This especially applies to locking an attractive interest rate and getting money back early.
Find Out When Your CD Matures
Ideally, a person should find out the potential maturity date of a CD before they commit themselves. Many people purchase CDs without checking and are subsequently shocked when they later realize they have tied their money up for the next 5 years. Before you decide to purchase a CD, ask to see the maturity date in writing.
Brokered CDs
Brokered CDs are typically more complex than the average CD and carry bigger risks than CDs that are offered from banks and financial institutions. If you want to cash out your brokered CD early, you will lose some of your principal. It is crucial you read all the same print pertaining to your brokered CD before you commit to buy. Because you are buying your brokered CD through an intermediary, you will also need to protect yourself from possible fraud.
Cashing Out Your CD
If you are the sole owner of your CD then you may be allowed to pay an early withdrawal penalty fee to the issuing bank to get your money back. If interest rates have dropped since you purchased your CD than you may be able to find a buyer. If interest rates have risen, your low- yielding CD will be harder to sell. You always face the risk of selling your CD for a discounted price and therefore losing some of your original deposit.
CD Problems
The safest way to approach cashing out your CD is to approach the bank or a financial adviser. They can talk you through options, explain what consequences cashing out your CD will have and allow you to make an informed decision on how you should proceed. If you are experiencing problems trying to cash out a CD early, you can contact the U.S Securities and Exchange Commission who, depending on your jurisdiction, will be able to assist you with a resolution.
