Another post about CD Rates

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Rajsx
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Another post about CD Rates

Post by Rajsx » Thu Sep 06, 2012 8:39 pm

I have 3 laddered CDs at DISCOVER BANK and a 10k CD is maturing this week, and I am looking around for any :oops: encouraging information and trying to decide what to do.

Today's rates DISCOVER - 1 yr - 0.90 APY
" " "" " "" " " " ALLY - 1 yr - 1.10 APY

I understand convenience differs from person to person, but would you open a new account with ALLY or say some other Bank and then keep track of it ??
or would you just continue with Discover to keep things simple, albeit with a little less return ??

Thanks for any opinions or insights.
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AQ
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Re: Another post about CD Rates

Post by AQ » Thu Sep 06, 2012 8:48 pm

For extra 20 dollars before tax, I won't bother. But maybe I am old now. When younger, I might do it.

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joe8d
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Re: Another post about CD Rates

Post by joe8d » Thu Sep 06, 2012 9:05 pm

I have a 1 year CD ladder ( w/3mo rungs ) with Ally.After the initial investment,they will add 25 bps loyalty bonus to any renewals.
All the Best, | Joe

Anon1234
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Re: Another post about CD Rates

Post by Anon1234 » Thu Sep 06, 2012 9:14 pm

Remember that you can create a 1, 2, 3 year ladder of CDs that are all 5 year CDs. It is the early withdrawal penalty that matters, not the term. So, for example, if you use ALLY 5 year CDs at 1.72% they only have 2 month EWP, so one year from now you will earn 1.72%, and pay 1.72*(2/12) = 0.287% penalty for a net return of 1.43%. And if nothing better is available in one year, then you do nothing and keep earning 1.72%.

surfer1
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Re: Another post about CD Rates

Post by surfer1 » Thu Sep 06, 2012 10:17 pm

I was just going to mention the same thing, Ally 5-year CD. With the penalty, it's 1.41% after 1 year, which beats the 1-year CD of 1.04%. Still, the rates stink. It's not much more than a high-yield savings, but it's something.
Anon1234 wrote:Remember that you can create a 1, 2, 3 year ladder of CDs that are all 5 year CDs. It is the early withdrawal penalty that matters, not the term. So, for example, if you use ALLY 5 year CDs at 1.72% they only have 2 month EWP, so one year from now you will earn 1.72%, and pay 1.72*(2/12) = 0.287% penalty for a net return of 1.43%. And if nothing better is available in one year, then you do nothing and keep earning 1.72%.

Rajsx
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Re: Another post about CD Rates

Post by Rajsx » Fri Sep 07, 2012 9:30 am

" Remember that you can create a 1, 2, 3 year ladder of CDs that are all 5 year CDs. It is the early withdrawal penalty that matters, not the term. So, for example, if you use ALLY 5 year CDs at 1.72% they only have 2 month EWP, so one year from now you will earn 1.72%, and pay 1.72*(2/12) = 0.287% penalty for a net return of 1.43%. And if nothing better is available in one year, then you do nothing and keep earning 1.72%."

**********************************************************************************************************************************************************************

Thanks Anon, for showing me to look at CDs this way, I am new at this game of CDs.

So well, I may well do a little better at ALLY with this kind of Ladder. Let me see if DISCOVER has something like this.

Thanks guys, appreciate your insights
We do not stop laughing because we grow old, we grow old because we stop laughing !!

Muchtolearn
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Re: Another post about CD Rates

Post by Muchtolearn » Fri Sep 07, 2012 11:16 am

$20 a year difference. I wouldn't click anything for that. Why not just buy some CDs from Vanguard?

Anon1234
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Re: Another post about CD Rates

Post by Anon1234 » Fri Sep 07, 2012 10:09 pm

Rajsx wrote:" Remember that you can create a 1, 2, 3 year ladder of CDs that are all 5 year CDs. It is the early withdrawal penalty that matters, not the term. So, for example, if you use ALLY 5 year CDs at 1.72% they only have 2 month EWP, so one year from now you will earn 1.72%, and pay 1.72*(2/12) = 0.287% penalty for a net return of 1.43%. And if nothing better is available in one year, then you do nothing and keep earning 1.72%."

**********************************************************************************************************************************************************************

Thanks Anon, for showing me to look at CDs this way, I am new at this game of CDs.

So well, I may well do a little better at ALLY with this kind of Ladder. Let me see if DISCOVER has something like this.

Thanks guys, appreciate your insights

Sure thing. I learned it from user Kevin M right here on bogleheads.org.

mackstann
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Re: Another post about CD Rates

Post by mackstann » Sat Sep 08, 2012 2:03 am

Muchtolearn wrote:$20 a year difference. I wouldn't click anything for that. Why not just buy some CDs from Vanguard?
You can't do an early withdrawal and you must sell them at market rate, which means they're more like a bond than a bank CD. Bank CDs and their lax EWPs somewhat shelter you from the ruthlessness of interest rate changes.
It does not matter how slowly you go so long as you do not stop.

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nisiprius
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Re: Another post about CD Rates

Post by nisiprius » Sat Sep 08, 2012 9:18 am

As time goes on I become more and more convinced that complexity in the form of too many accounts is poisonous. That's very likely a function of age (mid-sixties). However, I have faced/am facing two decisions and am opting for simplicity over optimality. If you're young and energetic and sort of enjoy mucking around with spreadsheets and money management, your mileage may vary.

I am influenced by personal experience locating my parents' assets after their death, and talking to others in the same situation. I also know a man who is terminally ill and on hospice care, a bright guy and lucid, but has not even gotten around to putting one statement from each of his accounts in one place where his wife can find it. I have conversations with him and he'll say "oh, yeah, and today a statement come in the mail from one of the accounts my mother had." "Carl: one of?" "Oh, she had several, they don't amount to much, just a few thousand in each." "Carl, would you mind reading it to me" "OK, which of these numbers do you want, let's see, it says the 'required minimum distribution' is thus-and-such." :oops: I said: "What? Carl, are you taking those required minimum distributions?" "What are they?" "Are you getting automatic payments of the required minimum distribution from this account? Do you get checks in the mail, or automatic deposits?" "No."

So, his wife is going to be faced with the alternative of a complicated inheritance and tax situation, or just passing up a "few thousand" dollars. Maybe it's best if she doesn't find the statement and doesn't know what she's missing :?

Anyway, decision #1: do I keep buying Series I savings bonds now that I can't get paper bonds? (I have a stack of them in the safe deposit box, co-owned with my wife, and I know she knows where they key is--actually it's a "her-and-him" account and I'm the one who gets the fisheye from the bank when I go in to use it). Answer: No, darn it all, because I am not going to open another online account. I only just got the Fidelity account closed and merged into Vanguard, reducing the number of accounts by one, I'm not going to add another one now.

Decision #2: About time to put $6,000 into the Roth. I don't plan to move any money from Total Bond into CDs, but the "CDs" talk is just convincing enough to make me think maybe I should just put the new money into a CD instead of Total Bond. But. My online bank account is at ING Direct, and their CD rates are fail-to-middling lousy. Am I going to open another account (Ally, PenFed, whatever?) No, I think not. Well, am I going to just buy the fair-to-middling-lousy CD from ING Direct? Phooey. As I say, I haven't decided, but whatever it is, it will be something that does not require me to open a new account... unless I can figure out how to close an old one!

P.S. If you are single, and you cannot quickly and accurately list, from memory, the names of every financial institution you have an account with, then you have too many. Usually not a problem.

If you have a shared financial situation with someone, and you and that someone cannot each slowly but accurately list, from memory, all the names of all of the financial institutions the other one has an account with, then you have too many. Ah, that's tougher.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

Dandy
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Re: Another post about CD Rates

Post by Dandy » Sat Sep 08, 2012 9:41 am

I use both Discover and Ally.

I use Discover for their money mkt fund and savings acct. Their CD rates are competitive but they have a 6 month or more penalty for early redemption of a CD. With interest rates likely? to rise you might want to cash a CD in early to get a better rate.

Ally Bank has a few CD advantages:
1. 2 month penalty on early redemption of a CD
2. Their 2 and 4 year CDs offer the ability to bump up the rate if their rate for that term increases
3. Every time my CD matures at Ally they offer me a 25bp bonus on their current rate. (this is not guaranteed or published)
4. Their CD rates are also competitive.
5. They offer a 11 month no penalty CD - depending on the rate not a bad place to put a downpayment when looking for a house.

I have had excellent service from both. Please verify the CD penalties and features at both banks before buying any CDs.

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neurosphere
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Re: Another post about CD Rates

Post by neurosphere » Sat Sep 08, 2012 10:01 am

nisiprius wrote: If you have a shared financial situation with someone, and you and that someone cannot each slowly but accurately list, from memory, all the names of all of the financial institutions the other one has an account with, then you have too many. Ah, that's tougher.
I'm not so sure about this. Yes, simpler is better, ESPECIALLY with a non-financially savvy spouse. But, I have a particularly complicated number of accounts spread out over 8-10 institutions (his/her 401k, his/her HSA, CDs, Roths, orphan 401ks, Treasury Direct, ING, Checking, etc). In any case, here is one part of the solution should I be hit by a bus tomorrow, and my wife need to know what's going on. First, I record everything in quicken. So she has been taught how to open the application and she can instantly see all the accounts and values. Second, I keep the same list of accounts on paper, together with account numbers, web addresses and passwords. This paper lives in our fire safe. So in the event of my demise, timely or otherwise, at least my wife (or whoever) will at minimum know where to look to find the location of our money.

In my case, I have very good reasons (or so I believe!) for the large number of accounts I have. But (back to the OPs question), I would not open another account in order to make an extra $20. In my opinion, that's not a "good enough" reason. However, everyone is different! YMMV and all that. :D

NS
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Rajsx
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Re: Another post about CD Rates

Post by Rajsx » Sun Sep 09, 2012 6:12 pm

After much thinking and such... I am renewing my CD at Discover, I am not opening another CD account at this time.

Thanks and regards
We do not stop laughing because we grow old, we grow old because we stop laughing !!

almeida
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Re: Another post about CD Rates

Post by almeida » Sun Sep 09, 2012 7:13 pm

Even though you've already decided to stick with Discover, I wanted to add a note about my experience with Ally. I recently moved some money, including some maturing CDs, to Ally because of (slightly) better rates. It's true that the difference amounted to peanuts, but I figured the hassle was low so that it was essentially free money if I switched. However, the hassle turned out not to be so low after all. The initial funding of the account mysteriously never happened and Ally had no record that it was supposed to happen, so I had to redo it. We went through four ATM cards for my wife because Ally kept getting her name wrong. That was really annoying. Sometimes, online statements are posted but there's no link to download them. I've had more problems with Ally in the first six months than in the last ten years combined with the previous bank. I've ended up spending a lot of time on the phone with Ally to get problems straightened out. In the end, all that time wasn't worth the extra peanuts. Sticking with what has been working sometimes makes a lot more sense.

steve_14
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Re: Another post about CD Rates

Post by steve_14 » Sun Sep 09, 2012 8:37 pm

almeida wrote:Even though you've already decided to stick with Discover, I wanted to add a note about my experience with Ally. I recently moved some money, including some maturing CDs, to Ally because of (slightly) better rates. It's true that the difference amounted to peanuts, but I figured the hassle was low so that it was essentially free money if I switched. However, the hassle turned out not to be so low after all. The initial funding of the account mysteriously never happened and Ally had no record that it was supposed to happen, so I had to redo it. We went through four ATM cards for my wife because Ally kept getting her name wrong. That was really annoying. Sometimes, online statements are posted but there's no link to download them. I've had more problems with Ally in the first six months than in the last ten years combined with the previous bank. I've ended up spending a lot of time on the phone with Ally to get problems straightened out. In the end, all that time wasn't worth the extra peanuts. Sticking with what has been working sometimes makes a lot more sense.
I had similar problems with my initial Ally funding. It was a mess.

TBillT
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Re: Another post about CD Rates

Post by TBillT » Mon Sep 10, 2012 10:43 pm

You might want to consider US Savings Bonds.
The i-BOND pays back inflation rate and is reasonable to cash in if needed.
If you can wait 20-years (college)the EE-BOND doubles in value (~3.3% interest) which beats CD's right now.
Lately I mostly use iBONDS, and prior to that the brokerage CD's from Fidelity and Vanguard, but it's been a over a year ago when you could get 3.3% CD out to 2018/2019. Even that was low interest but I now have ~5% appreciation too.
The other thing you see sometimes see (Fidelity) is CD's based on market performance of gold, S&P, etc which is a crap shoot but if the alternative is 1%, why not?

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