5. Zero-coupon CD
When talking about CDs, coupons refer to a periodic interest payment. Naturally, a zero-coupon CD would lack this interest. Instead, you buy the CD at a steep discount and, when the term ends, you’ll receive the matured CD. These types of deals are long-term investments only.
To put it simply, say you buy one for $50,000. You won’t earn any money during the lifespan of the CD, but at the end, you’d still withdraw $100,000.
There is one major drawback to this sort of account, though. Despite not earning any interest you will still be credited with a phantom interest, meaning you’ll still have to pay taxes on your ‘earnings’. What this means is that your tax bill will get bigger and bigger every year.
Before picking this option, ensure that you’ll be able to cover the added taxes.
1 thought on “12 Types Of CDs That Could Boost Your Savings”
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