Hudson City Savings Bank (OTC:HCFB) which serves the Connecticut, New Jersey and New York markets, is now offering some of the best CD rates in America, paying out 2.50% APY on 24-month certificates of deposit and a 3.00% APY on 36-month CDs.

As far as I’ve been able to find, there are no other banks that offer higher CD rates than this, although Flagstar Bank is offering the same interest rates on their 36-month CDs.

Here are the current terms of the CD as of this writing:

• 3.00% APY 3-Year CD ($5,000 minimum balance)
• 2.50% APY 2-Year CD ($5,000 minimum balance) 
• 1.75% APY Internet Money Market Savings ($2,500 minimum balance)

If you want to invest in the 3-Year CD, it’ll cost you $5,000, but if you live in the three states Hudson City Savings Bank serves, you can get in as low as $500. 

There are no other local limitations, and you can apply for the CD at the national level, i.e. it doesn’t matter where you live in the U.S., you can get in on the great interest rates.

Hudson City Savings Bank has been named as “The Most Efficient Bank” more than once, which allows them to offer better rates than the majority of their competitors, as you can see with the CD rates I mentioned here. They have 125 branches in the 3-state area they physically operate in.

CDs acquired from Hudson are insured by the FDIC for up to $250,000 until the end of 2009, where, along with all banking investments, will revert back to the former $100,000 per customer, unless that is changed. For now that is the known circumstances concerning insuring all banking accounts under the FDIC umbrella.

Do go to the bank’s web site to confirm the CD rates, as then can change quickly. But as of October 2, the CD rates stand as I’ve written here.

Other than a different name, a liquid CD is really not much different than a regular Cd, with the obvious exception of having access to you capital at any time.

You may also ask, if that’s the case, wouldn’t it be the same as a money market account and savings account? The answer would be: absolutely yes – but with an exception we’ll get into in a moment.

So you don’t get confused, a liquid CD is still a CD. You buy it in the same way you would a regular CD, only now you have access to your cash when you want it.

Similar to a regular CD, a liquid CD will also be insured by the FDIC, but your allowed withdrawals will be penalty-free, in contrast to a regular CD.

One thing to keep in mind when looking at investing in a liquid CD is the terms offered by the various institutions. In some cases a bank will cap the amount you can withdraw, so the liquidity offered is limited. In these cases there should be a trade-off of a higher interest rate in comparison to other liquid CDs offered by other banks, otherwise there would be no incentive to buy one.

Other limitiations some banks include are how many withdrawals you can make within a specified time period, or some banks leave the entire withdrawal situation alone and allow you to withdraw however much you want when you want. Again, if there are restrictions, look for higher interest rates or don’t bother with them, as there’s no reason in the world to get a limited product that is offered by someone else with the same or higher interest rates with no limitations. If there’s no added incentive to buy a CD with limits on withdrawals, simply pass on it and buy one that allows unlimited withdrawals with similar interest rates.

Now the interesting thing about a liquid CD, is it might be marketed by a bank as a great alternative to a regular CD, and it is as far as liquidity goes. But the problem is there are already savings products available like a money market account and a regular savings account where you have liquidity already.

So why would you even want to consider a liquid CD if there’s no real obvious advantage to buying one? The answer is it has to do with interest rates.

If we’re in a time of interest rates falling, then acquiring a liquid CD instead of using a savings account or money market account makes sense, as it will protect you from lowered returns during that period, while having immediate access to your money.

But if interest rates are bottomed out, like they are as of this writing, a liquid CD really offers no value at all, and performs exactly the same a a money market or savings account. It won’t hurt you, but it won’t help you either. The only thing it could do is lock you in to lower interest rates, keeping you from enjoying better returns.

Consequently, in a low interest rate environment like we are in today, there is no value in a liquid CD, and if you think interest rates will rise sometime soon, you could miss out if you’re locked into a liquid CD rate.

On the other hand, if interest rates start to move up and look like they’ll start declining again, a liquid CD makes sense, and it is the only real time it adds any value to your savings strategy.

While a bump-up CD is as safe as any CD, there is an included benefit, which when used right, can be a great way to take advantage of interest rates when the interest rate environment is one that is rising.

The duration of a bump-up CD can change from financial institution to financial institution, along with the interest rates offered, so you obviously need to do your homework concerning that.

What a bump-up CD is is just what it sounds like. If you buy a CD that has the bump-up option, what that does is allow you to participate in increased interest rates by telling your financial institution you want the new and higher rate as they’re offered. It’s as simple as that. If the interest rates rise, you contact who you bought the CD from and tell them you want the higher rate. It’s obvious, but you must buy a bump-up CD to get this. You can’t just buy a CD and tell the bank to bump it up, it doesn’t work that way.

The reason why, is the original bump-up CD will carry a slightly lower market rate at the time you buy it. A bank or financial institution will gamble that the interest rates won’t go higher during the time you own the CD, while you’re gambling it will, by buying the slightly lower interest rate. So in essence, both the bank and you are offering one another a carrot and a stick to make the transaction.

If interest rates don’t go up during the time you own the CD, the bank wins because they got use of your money at a better rate than they did from others, thus making more profit. If the interest rates do go up, you win, assuming they go higher than the market rate offered for regular CDs, so the bank makes less profits on your money, while you make a better return.

As a bump-up CD will be insured like any other CD, the risk isn’t in losing your money, the risk is in possibly making a smaller return.

So the obvious time to buy a bump-up CD is when it’s close to certain interest rates will start to rise, so you can essentially lock in a higher interest rate by temporarily accepting a smaller one until the higher rates kick in.

The other thing to take into consideration is the length of time it will take an interest rate to rise. You want to buy a bump-up CD when you believe there will be significant hikes in the interest rates … and soon, as the longer it takes to rise, the less chance you’ll have of making up the difference in interest rates when you first bought them, as it would have to rise fast and high the closer it gets to the end of the ownership period.
 
The strategy would be to buy them as close to the expected interest rate hike as you can, as that would give a CD the chance to move up a couple of times during the time you own it, giving you a much higher interest rate than you would have if you had bought a conventional CD.

Be sure to check with the institution as to how many bump-ups you’re allowed, as at times they’ll limit it to two or less, so you want to be sure if the interest rates rise, that you get the bump.

Also remember that just because the interest rate rises, doesn’t mean the bump automatically kicks in or you have to trigger it. The couple of bumps allowed by most banks can be taken an any time while you own the CD, and so you must keep a careful eye on when the best time will be.

One other thing to watch for is some banks require you to extend the length of the CD when you bump it up.

Keep all these factors in mind when looking into a bump-up CD. They can be great personal finance tools to use to get a better return on your money. Just understand what the bank or financial institution you’re buying it from requires, and watch the Federal Reserve and any expected announcements as to interest rate increases.

Most the times the consensus from analysts is pretty much on the money as to when interest rates will rise, the only question usually how many basis points.

The CEO of USAA Bank is offering a promotional offer for a 3.25% APY 2-year CD from now until May 31^st, 2009. You must be eligible for USAA property and casualty insurance to qualify for the CD, and the minimum deposit is $1,000. You need to mention the offer code CEO CD when opening your 2-Year CD. You won’t find this offer on the main USAA Bank website; it appears to only be offered through the link above.

USAA has received no government bailout money. In their 2008 report to members, they indicated that 94% of the members say USAA Bank meets or exceeds their family needs for financial solutions and advice. It also includes financial data that USAA is profitable and returned more than $857 million to the members – a portion of which were bank rebates and rewards.

Membership to USAA Bank is open to individuals who meet at least one of the following membership criteria:

• Active-duty officers and enlisted personnel.
• Children whose eligible parents have or had a USAA auto or property insurance product.¹
• National Guard and Selected Reserve officers and enlisted personnel.
• Officer candidates in commissioning programs (Academy, ROTC, OCS/OTS).
• Former military personnel:
  • Retired officers and enlisted personnel.
  • Former officers and enlisted personnel who separated from the military on or after Jan. 1, 1996.
• Former USAA members who had USAA auto or property insurance.

In addition to the 3.25% APY for the 2-Year CD promotion, if you are eligible for the CD you are also eligible to open a checking account and receive a $100 checking bonus. This offer is available through 5/31/2009 as well. If you’d like to call USAA Bank to open your CD or checking account with bonus, the phone number is (800) 531-8132.

While you must meet the above membership requirements for the promotional 2-Year CD and checking promotion described here, USAA Bank allows all United States Citizens to open a deposit product. They offer a free checking account with free ATM use around the world, and it includes free checks. Their CD products have a history of higher than average interest rates, and the USAA is known for providing quality services for consumers looking for automobile insurance coverage and mutual funds.

USAA Bank has headquarters in San Antonio, Texas. It is FDIC insured and has been since 1983. The BauerFinancial rating is 5 stars (superior) and Bankrate.com gives it a sound rating of 4 stars based on December 2008 data.

Although GMAC has been part of recent government bailouts to avoid bankruptcy, the bank continues to offer one of the higher 12 month CD rates
available in the US with it’s 2.95% APY.  This is down from 3% in February.
You can open a GMAC 12 Month CD with a minimum of $500, either by using their website or by calling on the phone.  You have the ability to fund the CD using an ACH fund transfer or by mailing a check.  The rates do not lock in until the money is received and the accounts are opened, so keep that in mind if you plan to mail your check the rate for the 12 month CD could change in the amount of time it takes to be mailed.  Also, if for any reason the bank takes awhile to open the account, you could have your CD opened at a different rate as well.  The interest rate at the time of application is not locked in – the interest rate on the day the account is physically created is the interest rate the CD will receive.

GMAC 12 Month CD’s have a 10 day grace period when they reach maturity.  During this 10 day window, you can close your CD without penalty to access the money, or you could choose to open a new CD.  If you withdraw your money from the CD before it matures, you’ll be hit with an early withdrawal penalty equal to 180 days of interest.

Interest earned on your GMAC 12 month CD can be posted monthly, quarterly, semi-annually or annually.

GMAC Bank offers other savings products, in addition to the Certificate of Deposits.  While they don’t have IRAs, they allow custodial and legally titled accounts, money markets and standard savings accounts.  The rates for both money  market and savings accounts have also dropped recently, although are still quite competitive, with 2.15% APY for the money market account and 2.75% APY for the online savings account.

If you have more than one account with GMAC you can transfer funds using the ACH transfer, and the process typically takes one or two days at most.

If you’re not sure which account would benefit you the most, you can use the GMAC calculator to check on different amounts of money saved in various accounts for varying lengths of time – to determine how much money you’ll earn.