Are CDs back? Well, not exactly

With the Federal Reserve nudging up interest rates, certificates of deposit could be more attractive to yield-hungry investors. Eventually. Here is what the experts think would have to happen first.

Reach a threshold.To lure investors to a CD, the ideal interest rate is around 3 percent, said Austin Frye, principal owner of Frye Financial Center in Miami, Fla. We are still a long way from that, he noted, and there are a lot of contingencies.

The biggest wrinkle is inflation. As interest rates gradually rise, so does inflation, which erodes the value of a fixed-income investment, said Greg McBride, chief financial analyst at Bankrate.

"If you start to get some difference between what you're earning and what is being chewed up by inflation, then CDs will be attractive again," he said.

Re-educate investors. At peak usage in 2009, U.S. credit union consumers, who make up about 10 percent of the CD marketplace, had $239 billion in CDs, but that has since dropped 18 percent, according to Mike Schenk, senior economist at the Credit Union National Association.

What is surprising to Schenk is that older, wealthier investors tend to hold CDs, despite minimal returns, especially when combined with fees.

If we do get to the point where CDs are viable investments again, there may be a whole generation of younger investors who have no idea what they are.

Even some older members of Generation X would not have accumulated significant enough assets before the recession to have considered a CD strategy.

Comparison shop. The next generation of CD investors will have a more flexible shopping experience than in the past. Chris Chen, an adviser at Insight Financial Strategists, remembers one client, prerecession, who had CDs at every bank in town because he was always shopping around for the best rate.

Today there are online marketplaces, like Bankrate, that make it possible to easily shop around outside your geographical area. It is also simpler to transfer money electronically and manage many accounts with one app such as Mint. Good shoppers stand to benefit.

"The Fed is going to raise rates gradually, and banks will boost rates even more gradually," said McBride. "You're going to have to seek it out."