Liquefy your investment
Liquid CDs offer consumers the opportunity to withdraw money from the CD without incurring a penalty. The interest rate should be higher than the bank's money market rate, but would usually be lower than a traditional CD of the same term and minimum. Just as with any CD, the terms and conditions are set by the individual banks and can vary widely.

State Security Bank of Mankato, Minn., offers a seven-month liquid CD, with two penalty-free withdrawals if a minimum balance of $10,000 is maintained. Take more than two withdrawals or drop below the minimum balance and your interest rate will drop by almost 1 percent for the remainder of the term.

Spokeswoman Pam Pinske says this particular CD offer isn't very popular and she suspects it's the $10,000 minimum.

"It's like anything, we try to offer customers things that would benefit them. The savings accounts aren't really paying much, so some of the other options involving CDs are better."

But a $5,000, nine-month liquid CD offered at The Mechanics Bank in Richmond, Calif., is very popular, according to spokesman Garrett Lambert.

"A lot of customers like the liquidity aspect of the CD. It fits their needs and that's why we offer it. Customers who want higher yields and are willing to deposit for longer periods would probably find our other CDs more attractive."

An example of how different banks can set different rules governing CDs; at Mechanics Bank a withdrawal triggers closing out the account -- no partial withdrawals are allowed on their nine-month liquid CD. At the Mankato bank, two withdrawals are allowed and the CD stays in effect even if the balance drops below the minimum, just at a lower interest rate.

A key consideration when purchasing a liquid CD is how soon after opening the account you'll be able to make a withdrawal. Federal law requires the money stay in the account for seven days before it can be withdrawn without penalty, but banks can set the first penalty-free withdrawal for any period beyond that.

Another consideration is the number of withdrawals allowed. And, of course, you'll have to decide if the convenience of liquidity is worth whatever return you're sacrificing when compared to similar term CDs without the liquidity feature.