CDs, for a Return Guarantee

For example, Countrywide Bank has an online-only offer ranging from 5.5 APY for a three-month CD to 5.65 APY for a 12-month. Longer-term CDs earn less: 4.6 APY. The minimum investment is $10,000 for a regular CD; $2,500 for one used in an individual retirement account, or IRA.

IndymacBank.com was quoting APYs ranging from 5 percent for three-month CDs to 5.7 percent for those that mature in five or six months. They have a $5,000 minimum investment for Internet accounts.

Rates on longer-term CDs, ranging from 18 to 60 months, were lower than those offered for shorter terms. ING Direct was quoting 5 percent, for maturities ranging from 18 months to 60 months, and IndymacBank offered 5.2 percent for maturities between 18 months and five years. "That's a reflection that interest rates are expected to decline," said McBride. "Banks don't want to be on the hook for an above-market yield for the long term."

The idea of locking in a guaranteed return of more than 5 percent for several years is pretty compelling for a consumer, even if a slightly higher rate could be earned in the short term.

Jim Kelly, chief operating officer for ING Direct, said that, to account for higher risks, markets usually place a higher price on long-term instruments. But that's not the situation today. "Markets are very nervous, and banks and other companies who need money are paying to get their hands on it," Kelly said.

When financial institutions are not anticipating a decline in interest rates, it's common for longer-term CDs to carry a higher interest rate than short-term commitments'. To take advantage of the longer-term rates, an investor can build a "ladder" of CDs in a way that ties up most of the money at higher, long-term rates, while keeping a portion of it available for re-investment each year.

For example, if you had $25,000 to invest in CDs, you might build a ladder with five rungs, with the rungs representing CDs of different duration. The top rung is a five-year commitment; the second rung is a four-commitment, and so on. You fund each with $5,000. One-fifth of your total investment would mature each year, allowing you to re-invest the money at the highest prevailing rate. This gives you the ability to lock in attractive rates for the long term without running the risk that all of your money would be tied up in the event that interest rates rise.

As with all investments, it's crucial that an investor pay attention to the fine print before investing. In particular, check to see if it is "callable," which entitles the bank to call off the deal before maturity if market rates decline. The bank would return your principal and the interest earned to date. Callable CDs should offer you a higher interest rate in return for your acceptance of that risk.

Check the details on how your funds will be handled when the CD reaches maturity. Many institutions automatically roll over your funds into a new CD of the same duration at the prevailing interest rate unless you give them other instructions within a week or two of maturity.

If you are investing a large amount in CDs, $100,000 or more, you could have to spread the investment among several institutions to make sure it is fully covered by FDIC insurance. Each investor is covered up to a total of $100,000 on deposit with each FDIC-insured institution. Retirement accounts are covered up to $250,000.

Internet searching, however, could lead you to some CDs that stray so far from the old, reliable, guaranteed-return model described above that it's reasonable to wonder whether they should still be considered CDs.

EverBank.com is one of a few institutions offering such "structured products." Among the offerings are MarketSafe CDs, which have a minimum investment of $1,500. They guarantee a return of the investor's principal but tie returns to gold or silver prices. If an index of the precious metal's price rises, the investor's return reflects that increase. If the asset falls, the investor could earn zero return.

EverBank also offers CDs, with a minimum investment of $10,000, that are tied to a variety of foreign currencies. Investors can lose principal on these CDs if currencies lose value compared with the U.S. dollar.

Bob Rockwell, a certified financial planner with Cambridge Investment Research in Sandy, Ore., says such instruments allow clients an economical, relatively low-risk way to speculate in normally risky investments, but he prefers a well-balanced portfolio of investments in stocks, bonds and cash-equivalents such as CDs or money-market instruments. "It's an investment for somebody who wants to dabble," he said.

McBride, at Bankrate, says he's not a big fan of them, either. "The investor may view that as having your cake and eating it, too," he said. "But you're getting a pretty small sliver of cake."