In deposit terminology, the term Liquid CDs refers to a certificate of deposit (CD) or savings account where the depositor is permitted to take funds out without incurring a penalty. Such Liquid CDs often require a minimum balance to be maintained and have a maximum number of permitted withdrawals.
For example, the interest rate on Liquid CDs usually falls somewhere between a bank�s money market account rate and its rate on CDs of a comparable term. Also, Liquid CDs often have a minimum deposit period as part of their contractual terms. In the United States, Federal law necessitates that funds deposited in a Liquid CD must remain in the account for an initial period of at least seven days before penalty free withdrawals can be made, although the bank taking the deposit can set any period longer than that.Investors considering placing funds in Liquid CDs need to take into account whether the convenience of the withdrawal option they offer outweighs the reduction in returns.