Periodical CD Interest Payments

Those in the stage of life where they’re living on fixed incomes should have financial plans; this includes moving into low risk investments where the principal will be safe and money earned can be easily accessed if necessary. A great place to start is with a certificate of deposit or CD. CDs are low risk as they are protected by FDIC insurance up to 250k until January 2010, and may go back down to $100k again; and if you are willing to pay penalties such as forfeited interest, your money can be easily accessed. They also can provide you with extra pocket cash if you are living on a fixed interest.

A known fact about CDs is that the investor can opt to have the interest generated issued to them in a check or rolled over into a savings account. The principal will still stay intact and ultimately there will be fewer earnings from the investment but it could provide a much-needed cash flow when trying to make ends meet.

The disadvantage to choosing to receive a periodic CD interest payment is ultimately the money invested would have a lower yield rate. Typically, the interest rate on compounding CDs, meaning the money earned, gets added to the principal balance and then interest is earned on the total investment. By deciding to have your interest paid out, the money cannot compound and you will continue to earn interest only on your initial investment.

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If the fringe benefit of periodical CD interest payments sounds like something you would be interested in, you must discuss the option with your financial institution. The bank issuing your CD does not generally promote the periodic interest payment and if you want to opt in, the selection must be made at the time the CD is opened.

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Periodical CD Interest Payments
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