3 Unique CDs That Could Be Great Investments in 2024

Most banks offer the same basic type of certificates of deposit. Standard CDs come in a variety of terms ranging from three months to five years, with many in between. They charge a penalty, called an early withdrawal penalty, if you take money out before the maturity date. And your interest rate stays the same for the entirety of the term.

However, not all CDs fit this standard framework. Here are three unique types of CDs offered only by certain banks, and if the traditional CD structure doesn't appeal to you, one of these alternatives might.

1. Protection if rates go up

As mentioned, CD interest rates are at the highest level in years. But what happens if you put money in a CD and rates keep rising? You'll be locked in at a lower APY.

That's where a bump-up CD (also commonly called a step-up CD) comes in handy. A bump-up CD works much like a standard CD, with one big difference. If the bank's advertised interest rates rise during the term, you are allowed to request a one-time rate adjustment. Marcus by Goldman Sachs has an excellent product called the 20-month Rate Bump CD with a competitive interest rate and a $500 minimum to open.

To be sure, the most likely direction for CD yields over the next couple of years is down, but that isn't guaranteed by any means. If inflation unexpectedly spikes and the Fed has to keep raising rates, a bump-up CD can be a great asset.

2. It's your money -- take it out when you need it

Most CDs assess a penalty if you need to take your money out before the end of the term, and it is usually equal to a few months' worth of interest.

However, there are no-penalty CDs that combine the flexibility of savings accounts with the guaranteed yield that comes with a CD. For example, Ally Bank offers an 11-month no-penalty CD that has no minimum deposit requirement. You can withdraw the full account balance at any time, and for any reason, without paying a penalty.

To be sure, the rate paid by Ally's CD is roughly 1 percentage point less than the going rate for a standard CD of the same maturity term. But the flexibility could be worth the lower earning potential.

3. Lock in a rate for longer than five years

It's rare to find a bank that issues CDs with terms longer than five years, but Discover® Bank is one of them. It offers its CDs in all of the standard lengths, plus seven- and 10-year versions. These can be excellent ways if you want a guaranteed yield for longer than most CDs will provide.

As of this writing, Discover's 10-year CD has a 3.75% APY. The bank's CDs have a $2,500 minimum deposit requirement.

Now, one argument against using a 10-year CD is that you should simply buy a 10-year Treasury, which has a yield that's close to 4.70% right now. This is certainly a viable option, but there are some potential drawbacks to keep in mind. Most notably, the market value of Treasuries fluctuates with market conditions over time, and if yields rise after you buy, your Treasuries can be considerably less valuable.

If you need to cash out your 10-year CD early, it will cost you a few months' worth of interest. But if you end up needing to get out of a 10-year Treasury, you could lose a significant chunk of your principal.

Is one of these right for you?

As you can see, these are three options for savers who have complaints about the traditional CD model. Maybe you don't like the idea of paying an early withdrawal penalty, or are worried that you'll put money in a CD only to watch rates proceed to increase. Or, maybe you need a predictable income stream for more than five years. If any of these describe you, don't worry -- there's a CD for that.