The Triple Option CD – What Is It and How Does It Work?

There’s a new type of CD being offered by some banks lately called the Triple Option CD. While you may have heard of other types of CDs such as the bump-up CD (one that lets you “bump up” your interest rate) and the no-penalty CD (lets you withdraw from your CD penalty-free), a triple option CD is not quite as familiar to the ears.

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Well, get this: it is actually a combination of these two CDs and more. To be more specific about it, a triple option CD allows you to:

• Increase or bump-up your CD rate at least once for the duration of the term;
• Make a one time penalty-free withdrawal; and
• Put in additional funds into the CD.

It essentially gives you maximum flexibility and control over your CD to suit your investment plans, yet at the same time, also takes your emergency needs into consideration.

However, the specific conditions attached to the above features depend on the bank where you purchase your CD from. For instance, most banks offering triple option CDs will only let you make an additional deposit of up to 50% of the original amount. In the same way, the free withdrawal in most cases is only allowable for up to 50% of the CD amount as well. For some banks, the penalty-free withdrawal is applicable to cases of “medical hardship” only. Also, some banks charge a small fee each time you choose to exercise any one of the three options.

Triple option CDs offered by different banks do have many features in common such as:

• They are usually available in 36-month or 3-year terms;
• They require minimum deposit amounts that are higher than traditional CDs, often ranging from $2,000 to $25,000; and
• Interest rates that are often within close range of the regular 36-month CD rates.

Once you are able to make a realistic assessment of your finances and possible cash needs for the next 3 years, you’ll find that triple option CDs may indeed be a viable option for you.