What is a negotiable certificate of deposit (NCD)?

Want to invest at least six digits in your certificate of deposit (CD)? Searching for the right CD allows you to consider Jumbo CDs or products (NCDs) called similar, but less common products.

A negotiable CD can sometimes look like an attractive option for large deposits, but that’s not your best choice. why? First of all, you will still have a hard time finding a bank that offers NCDs to individuals. Secondly, these CDs are mostly for institutions, as they are often sold in a $1 million denomination.

If you have money to invest in an NCD, you can evaluate two features. These CDs may be sold before they mature and negotiate rates and other terms.

Negotiable CDs have some characteristics that are common to traditional non-negotiable CDs, but they are different too. Using both types of CDs, you agree to deposit the set amount in exchange for the guaranteed interest. Both are low risk and come with FDIC insurance up to $250,000.

However, looking beyond the basics, NCDs have a lot of unique features.

• issue: They are issued only by certain types of financial institutions, including national and state characterised banks, savings associations, and state and federal credit unions.

• Fee: Interest can be fixed or fluctuating, and fees are similar to those that could be earned under the Ministry of Finance bill. Prices are primarily determined by market forces, but sometimes they can be negotiated with the issuer.

• negotiation: Potentially negotiate the frequency of receiving CD terms and interest payments. You may also be able to negotiate a higher interest rate based on the interest rate of your competitors or by committing to making additional deposits with the issuer.

• Clauses: Conditions usually range from 1 month to 1 year, with average maturity currently only 2 weeks. You cannot cash out NCDs before maturity, but you can sell them to other investors in the secondary market.

• Amount: The minimum amount you need to deposit to open an NCD is $100,000.

• payment: Interest is usually paid at maturity. If this term exceeds one year, it will be paid every six months. If you sell CDs, you will be paid when your order is placed.

read more: CD and Treasury bill: Maximizing your savings

Few retail banks offer negotiable CDs to individual investors, but you may be able to find NCDs at national or state characteristic banks, savings associations, or state or federal credit unions.

For example, the only negotiable CD we could find was from the Ascend Federal Credit Union.

Even if you find an NCD to invest in, it won’t be your best choice.

Unlike traditional CDs, NCD rates may fluctuate. That is, it fluctuates in the market. If the rate increases, the publisher may be able to “call” the CD. This means you can close your account early. If your fees drop, you may be tempted to sell on the secondary market, but you will need to discount CDs and make a loss.

Plus, FDIC insurance is limited to $250,000, so investing that dollar in NCD is risky.

read more: What is a CD called?

Fortunately, NCD is not just an investment account that allows you to earn competitive interest rates in your short and medium-term savings. Instead of investing in NCD, consider one of these options.

• Ministry of Finance’s Invoice: Investing in T-Bill is safer than CDs, as all dollars are supported by the full faith and credibility of the US government. This means that if your bank fails, you don’t have to worry about losing your money, and you don’t have to worry about insuring more than $250,000.

• Jumbo CD: Look for jumbo CDs with fixed interest rates and are not called. This option locks the guaranteed rate for the entire CD period.

• Mediated CD:If you need the opportunity to sell before your CD matures, look into the broker CDs that you may purchase and sell. However, there are some drawbacks, including the fact that it attracts simple interest rather than compound interest and is not always FDIC insurance.

Not all jumbo CDs are negotiable, but most of them are negotiable.

Not many banks offer negotiable CDs to individual investors. You may be able to find it in a national or state bank or a state or federal credit union.

You may be able to negotiate a higher interest rate on a negotiable CD by showing the publisher that your competitors are offering higher interest rates.

read more: Can I negotiate a higher savings account fee at my bank?