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Risks And Benefits Of Callable CDs

Tuesday, February 8, 2011 - 8:54 AM
One interesting opinion mentioned about callable CDs in this Bankrate.com article is that they are a "heads-I-win, tails-you-lose proposition for the bank". However, it did mentioned that they are better deals in a rising interest rate environment.

If the callable CD has a higher rate than a fixed-rate CD with the same maturity, you win if the bank doesn't call the CD. If the bank calls the CD when interest rates are rising, that also could be a good deal for you. I suppose in that case, the chance of the CD being called is small.

One other thing not mentioned in the article is that callable CDs are more common in brokered CDs. Brokered CDs have their own issues like the potential loss if you need to sell the CD on the secondary market.
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Ken TuminKen Tumin5,442 posts since
Nov 29, 2009
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