Best CD rates thread

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jeffyscott
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Re: Best CD rates thread

Post by jeffyscott » Tue May 05, 2020 9:26 am

Brokered CD yields are above average, but lower than the best direct CDs. Average direct 5 year CD yield is about 0.7% according to bankrate, brokered 5 year CD is at about 1%, based on Vanguard's site.

https://www.bankrate.com/banking/cds/cu ... est-rates/

Brokered CD rates are also far better than direct CD rates offered by the largest banks, Chase, B of A, and Citi 5 year rates are 0.15% to 0.25%.
Time is your friend; impulse is your enemy. - John C. Bogle

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Ricchan
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Re: Best CD rates thread

Post by Ricchan » Tue May 05, 2020 9:33 am

Kevin M wrote:
Mon May 04, 2020 5:50 pm
Summit111 wrote:
Mon May 04, 2020 2:40 pm
Wonder why Vanguard CD rates are lower than others...Much higher at individual banks....

Summit
It is not uncommon for brokered CDs to have lower yields than direct CDs. It has been that way most of the time since I started moving fixed income heavily into CDs in late 2010.

Kevin
I only started looking into brokered CDs in 2017, so my experience has been heavily biased by a period where brokered CD rates were higher than even the highest yielding direct CDs. The experience from the past year has definitely helped to reset that bias, though.

I wish there existed historical data of CD rates from various institutions, both direct and brokerage, so you could compare how each responds to changes in the fed rate. Or maybe an aggregation of the top 10% (or so) yielding CDs from each group, for various terms, over time. Maybe such data does exist, but I just haven't been able to find it?

rockstar
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Re: Best CD rates thread

Post by rockstar » Tue May 05, 2020 10:23 am

Also, check if they’re callable. I bought a bunch of CDs across multiple finance companies. And I made the mistake of buying some callable CDs. They got called on me this morning. It’s a small $5k position, but it’s something I overlooked. The rest are all non-callable.

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Kevin M
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Re: Best CD rates thread

Post by Kevin M » Tue May 05, 2020 6:51 pm

Ricchan wrote:
Tue May 05, 2020 9:33 am
I wish there existed historical data of CD rates from various institutions, both direct and brokerage, so you could compare how each responds to changes in the fed rate. Or maybe an aggregation of the top 10% (or so) yielding CDs from each group, for various terms, over time. Maybe such data does exist, but I just haven't been able to find it?
I don't know about a comprehensive source, but you can view some history for CD rates for specific banks and credit unions at DepositAccounts. For example, we can see Ally Bank 5-year CD rates back to 10/22/2009 by going to this page, https://www.depositaccounts.com/cd/5-year-cd-rates.html, scrolling down to Ally Bank, clicking the Details down arrow, and looking at the history chart to the left.

The lower bound of the federal funds target rate was 0% when I started buying direct CDs in September 2010; yield on my first 5-year CD was 2.74%, and next few purchased in Oct and Nov were 2.49%, all from Ally. Then in Nov 2010 PenFed offered a 7-year at 3.49%, so I bought some of that in an IRA.

The lower bound of the target FFR remained at 0% until Dec 2015, and I bought 5-year CDs throughout that time at yields from 2% to 3.05%.

In May of 2018 lower bound of the target FFR was 1.5%, and I bought a 5-year CD at 4.20%.

Although the general trend of CD yields was up as the FFR increased, and has been down with the FFR decreases, the best CD deals don't seem to be much related to the FFR.

I always compared my direct CD yields to Treasury yields of same maturity, and I've averaged about 115 basis points over the Treasury yields since late 2010. With the best 5-year direct CDs now at about 2% and the 5-year Treasury at 0.36%, the yield premium of about 160 basis points is much higher than my average.

Kevin
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Summit111
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Re: Best CD rates thread

Post by Summit111 » Tue May 05, 2020 8:24 pm

Kevin,

I buy only direct CDs inside of my Vanguard Traditional IRA, no brokered CDs. I noticed Vanguards lack of competitive rates starting a little over a year ago....I’ve wondered why the change....

Summit
“Got my mind on my money, and my money on my mind!” Snoop Dog

EvelynTroy
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Re: Best CD rates thread

Post by EvelynTroy » Wed May 06, 2020 8:06 am

I would appreciate some direction on possible purchase of a CD- I prefer not to go out 5 years.
The national top rates I can find with easy membership are via depositaccounts.com

Keesler Federal CU - $100K minimum for a 30 month blended step CD - I'd not heard of this type of CD -
1.10% for 1st 10 months
2.10% for the 2nd 10 months
3.10% for the final 10 months
results in blended rate of 2.14%
Membership - joining Amer. Cancer Society

Advancial CU (Texas) $5 fee to join an organization called Connexant?
4 yr. CD 2.05% ($50k) 4-year Jumbo Certificate
5 yr. CD 2.16% ($50k) 4-year Jumbo Certificate

Question: Do you think there is a better deal out there that is better?
Of these two I'm thinking the Keesler one is better because its for 30 months as opposed to 48 and overall bit more interest in the end.
Or would you stay away form this "blended" offer.

Thanks.
Evelyn

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Re: Best CD rates thread

Post by hudson » Wed May 06, 2020 8:16 am

EvelynTroy wrote:
Wed May 06, 2020 8:06 am
I would appreciate some direction on possible purchase of a CD- I prefer not to go out 5 years.
The national top rates I can find with easy membership are via depositaccounts.com

Keesler Federal CU - $100K minimum for a 30 month blended step CD - I'd not heard of this type of CD -
1.10% for 1st 10 months
2.10% for the 2nd 10 months
3.10% for the final 10 months
results in blended rate of 2.14%
Membership - joining Amer. Cancer Society

Advancial CU (Texas) $5 fee to join an organization called Connexant?
4 yr. CD 2.05% ($50k) 4-year Jumbo Certificate
5 yr. CD 2.16% ($50k) 4-year Jumbo Certificate

Question: Do you think there is a better deal out there that is better?
Of these two I'm thinking the Keesler one is better because its for 30 months as opposed to 48 and overall bit more interest in the end.
Or would you stay away form this "blended" offer.

Thanks.
Evelyn
If I was in your boat, I would go with the Advancial 5 year because it's longer and simpler.
I looked yesterday and couldn't find a better deal.
The Keesler could work just fine.
For fixed income people, this is the hard part....longer or shorter?

EvelynTroy
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Re: Best CD rates thread

Post by EvelynTroy » Wed May 06, 2020 8:22 am

Thanks Hudson - yes you hit the nail, longer or shorter duration is big question.
Also something to be said for "simple."
We'll see if anyone else has any thoughts.
Evelyn

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Re: Best CD rates thread

Post by hudson » Wed May 06, 2020 8:32 am

EvelynTroy wrote:
Wed May 06, 2020 8:22 am
Thanks Hudson - yes you hit the nail, longer or shorter duration is big question.
Also something to be said for "simple."
We'll see if anyone else has any thoughts.
Evelyn
Is there anything out there better...with the information that we have right now?
Both are great choices. Maybe rely on a coin toss?

EvelynTroy
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Re: Best CD rates thread

Post by EvelynTroy » Wed May 06, 2020 8:34 am

hudson wrote:
Wed May 06, 2020 8:32 am
EvelynTroy wrote:
Wed May 06, 2020 8:22 am
Thanks Hudson - yes you hit the nail, longer or shorter duration is big question.
Also something to be said for "simple."
We'll see if anyone else has any thoughts.
Evelyn
Is there anything out there better...with the information that we have right now?
Both are great choices. Maybe rely on a coin toss?
Coin might work. I do know I should get busy, money laying in brokerage cash account earning next to nothing, and making Schwab wealthier and not me.
Evelyn

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CWRadio
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Re: Best CD rates thread

Post by CWRadio » Wed May 06, 2020 8:47 am

Summit111 wrote:
Tue May 05, 2020 8:24 pm
Kevin,

I buy only direct CDs inside of my Vanguard Traditional IRA, no brokered CDs. I noticed Vanguards lack of competitive rates starting a little over a year ago....I’ve wondered why the change....

Summit
How do you buy direct CDs inside your Vanguard IRA? Thanks Paul

EvelynTroy
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Re: Best CD rates thread

Post by EvelynTroy » Wed May 06, 2020 9:01 am

hudson wrote:
Wed May 06, 2020 8:32 am
EvelynTroy wrote:
Wed May 06, 2020 8:22 am
Thanks Hudson - yes you hit the nail, longer or shorter duration is big question.
Also something to be said for "simple."
We'll see if anyone else has any thoughts.
Evelyn
Is there anything out there better...with the information that we have right now?
Both are great choices. Maybe rely on a coin toss?
Quick follow-up - Kessler Federal CU is not available for membership via the American Cancer Society Action Network as noted on depositaccounts.com unless you are a resident of certain Louisiana or Mississippi counties. Its more of a local ACS network.
DA indicated:
Membership in Keesler Federal Credit Union is open to anyone who joins the American Cancer Society Cancer Action Network, regardless of residency.
According to CR definitely not the case.
Evelyn

EvelynTroy
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Re: Best CD rates thread

Post by EvelynTroy » Wed May 06, 2020 11:48 am

And now another depositaccounts.com "easy membership" CU is wrong - according to the CR I spoke with today.
My next choice of CD purchase was Advancial Federal CU - DA says: Membership in Advancial is open to anyone by joining Connex for a $5 fee.

I phoned the CU today 5/6 - Connex is not an organization they recognize for membership. The CR went to a supervisor to verify. There are significant membership eligibility limits for this CU

Just a heads up in case anyone thinking of purchasing a CD - they have nice 4 yr. jumbo rate.
Evelyn

HomeStretch
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Re: Best CD rates thread

Post by HomeStretch » Wed May 06, 2020 12:23 pm

EvelynTroy wrote:
Wed May 06, 2020 11:48 am
And now another depositaccounts.com "easy membership" CU is wrong ...
The depositaccounts.com website has an email address feedback@depositaccounts.com to report inaccurate information

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Kevin M
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Re: Best CD rates thread

Post by Kevin M » Wed May 06, 2020 12:35 pm

Summit111 wrote:
Tue May 05, 2020 8:24 pm
Kevin,

I buy only direct CDs inside of my Vanguard Traditional IRA, no brokered CDs. I noticed Vanguards lack of competitive rates starting a little over a year ago....I’ve wondered why the change....

Summit
Your CDs with Vanguard are brokered CDs, by definition. Vanguard is a broker, so any CDs you buy from them are brokered.

Direct CDs are ones you buy directly from a bank or credit union.

Actually it was the period of about a year or so, that ended when you noticed it, that was the exception, at least since late 2010 when I started buying direct CDs.

My guess is that brokered CDs became competitive when rates in general were higher. When rates are lower, the good direct CD deals stand out more, and perhaps banks and CUs are more willing to offer better than market rates then.

Here is a chart of the 5-year Treasury yield since September 2010:

Image

Note that the yield was mostly below 2% for most of the time, but had a sustained increase above that starting in Nov 2017, peaking in a little above 3% in Nov 2018, then declining back below 2% by Jun 2019. It was during that hump in the 5-year yield that brokered CDs became competitive, as did Treasuries, especially in a taxable account for someone paying state income taxes. I was buying both brokered CDs and Treasuries during that hump period, but mostly direct CDs the rest of the time.

Kevin
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zaplunken
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Re: Best CD rates thread

Post by zaplunken » Wed May 06, 2020 3:01 pm

CWRadio wrote:
Wed May 06, 2020 8:47 am
Summit111 wrote:
Tue May 05, 2020 8:24 pm
Kevin,

I buy only direct CDs inside of my Vanguard Traditional IRA, no brokered CDs. I noticed Vanguards lack of competitive rates starting a little over a year ago....I’ve wondered why the change....

Summit
How do you buy direct CDs inside your Vanguard IRA? Thanks Paul
That was what I was wondering too!

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Re: Best CD rates thread

Post by Kevin M » Wed May 06, 2020 5:07 pm

zaplunken wrote:
Wed May 06, 2020 3:01 pm
CWRadio wrote:
Wed May 06, 2020 8:47 am
Summit111 wrote:
Tue May 05, 2020 8:24 pm
Kevin,

I buy only direct CDs inside of my Vanguard Traditional IRA, no brokered CDs. I noticed Vanguards lack of competitive rates starting a little over a year ago....I’ve wondered why the change....

Summit
How do you buy direct CDs inside your Vanguard IRA? Thanks Paul
That was what I was wondering too!
You can't. I just think that there was some misunderstanding about what "direct CD" means.

Maybe Summit111 was referring to new issue CDs, as opposed to CDs bought on the secondary market. They're all brokered CDs, but the purchase process is different.

Kevin
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Bfwolf
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Re: Best CD rates thread

Post by Bfwolf » Wed May 06, 2020 5:12 pm

So the Navy Federal 3% IRA certificate special is over, but I rolled some money over prior to that and found out something I wasn't aware of before.

I already had ~$110K in a ~3.6% IRA certificate with them that matures June 2022. They put $40K of my rollover into this certificate to bring it up to its max of $150K and the remainder in the new 3% certificate.

When I called them, they said that when the 3.6% certificate matures in 2022, I can roll over a portion of that into the 3% certificate, bringing the 3% certificate up to its maximum of $150K.

The learning here is that once you open a certificate with them, you can apparently add more money to that certificate at a later time. Taking this idea to its extreme, one could put small amounts of money in their special certificates whenever they become available. And that gives you the optionality later of adding in a BUNCH of money at that rate if rates drop before your certificate matures.

Even without a drop in rates, one could find this strategy useful if one was interested in shorter term certificates. One could put a small amount of money in a 37 month high rate certificate and then 31 months later dump in a bunch of money to earn that high rate on what is effectively a 6 month certificate at that point.

If I'm missing something here, please point it out to me.

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Kevin M
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Re: Best CD rates thread

Post by Kevin M » Wed May 06, 2020 5:43 pm

Bfwolf, these are add-on CDs with a balance cap, and those indeed can be a great way to lock in a rate, with the option of adding to it later if there are not much better deals elsewhere at the time.

If you look at the CDs that were discussed in the OP of this thread, you'll see that these also offered an add-on feature, but there were some unique aspects. There were no balance caps, other than what might want to adhere to for deposit insurance purposes, but you had to specify how much to add to the CD monthly within 30 days of opening it. If the money is in your share or checking account (whichever you specified) on the specified addition date, the money is added to the CD, and if the full amount of money is not there, nothing happens, but you can make the specified additions in future months.

Kevin
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quisp65
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Re: Best CD rates thread

Post by quisp65 » Thu May 07, 2020 10:05 am

Anyone got any history, story or theory regarding snowbirds and credit unions membership? Sometimes these credit unions are lax on membership.

The slang definition of snowbirds of course could be open to interpretation. Honesty is certainly tantamount here given bank fraud laws, but some of those rates are a lot higher in local areas if you set location to "any" at depositaccounts. Traveling for a local visit is fun in retirement and there are even local savings and loans that might not have any restrictions.

Would love to hear stories on this topic.
Plan: 75/25 stock index/cash investments, one-way balance market highs, 3.2% withdrawal rate at 54, can lower expenses easily by 1/3rd

hudson
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Best 5 Year CD

Post by hudson » Thu May 07, 2020 5:58 pm

Federal Savings Bank 2.05% APY...$10K Minimum

https://www.thefederalsavingsbank.com/p ... osit-rates

anoop
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Re: Best CD rates thread

Post by anoop » Fri May 08, 2020 1:13 am

With new issue brokered CDs, do you always get the rate at which it is advertised or is there any chance that it is oversubscribed and so you get a lower rate as sometimes happens with buying treasuries at auction?

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Re: Best CD rates thread

Post by hudson » Fri May 08, 2020 11:26 am

anoop,
I'm not an expert. I believe on brokered CDs, you get the price that signed up for. It's like a contract. They make an offer; you accept...deal.

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Kevin M
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Re: Best CD rates thread

Post by Kevin M » Fri May 08, 2020 2:50 pm

anoop wrote:
Fri May 08, 2020 1:13 am
With new issue brokered CDs, do you always get the rate at which it is advertised or is there any chance that it is oversubscribed and so you get a lower rate as sometimes happens with buying treasuries at auction?
It's nothing like a Treasury auction, for which you only know an estimated yield in advance, and the actual yield is determined by the auction. The CD yield is firm, and a broker can't sell more than is available in their inventory. You'll see the quantity available from your broker, and once that amount is sold, no more will be offered by your broker unless they get some more into their inventory.

I've bought a number of brokered CDs, both new issue and secondary, and have always received the quoted yield.

It's currently kind of a moot point within the context of this thread, since you won't find "best CD rates" for brokered CDs (compared to direct CDs).

Kevin
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anoop
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Re: Best CD rates thread

Post by anoop » Fri May 08, 2020 2:59 pm

Kevin M wrote:
Fri May 08, 2020 2:50 pm
It's currently kind of a moot point within the context of this thread, since you won't find "best CD rates" for brokered CDs (compared to direct CDs).
And the difference is quite large right now! The money market account yield 0.01%, short term t bills around 0.1% (10x difference) and a short term brokered CD maybe 0.2-0.3% is what I'm seeing now. Pretty sorry state of affairs. I just went through a process of account consolidation so I don't want to start the reverse process and open up a bunch of accounts now. :(

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Ricchan
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Re: Best CD rates thread

Post by Ricchan » Wed May 13, 2020 2:51 pm

Thanks @KevinM for the information about the CD rate history charts on DepositAccounts!

For those who signed up for the PSECU CDs with monthly add-ons, do you have any plans on what to do if / when your total amount goes over the NCUA insured amount of $250,000, if not already?

I had originally setup the add-on contributions ($25k) with about 6 months in mind, as that would bring me over the NCUA limit. But now with rates being so low everywhere, I wonder if it's worth the risk to continue contributing monthly (and thereby going over the insured amount) just to take advantage of the 3.25% rate?

I admit this is very much a first world problem, and it's not my intention to be insensitive. But I would appreciate hearing your thoughts on this. Am I being too greedy? How real is the risk of PSECU or similar credit unions collapsing? Thanks.

protagonist
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Re: Best CD rates thread

Post by protagonist » Wed May 13, 2020 2:56 pm

EvelynTroy wrote:
Wed May 06, 2020 9:01 am
hudson wrote:
Wed May 06, 2020 8:32 am
EvelynTroy wrote:
Wed May 06, 2020 8:22 am
Thanks Hudson - yes you hit the nail, longer or shorter duration is big question.
Also something to be said for "simple."
We'll see if anyone else has any thoughts.
Evelyn
Is there anything out there better...with the information that we have right now?
Both are great choices. Maybe rely on a coin toss?
Quick follow-up - Kessler Federal CU is not available for membership via the American Cancer Society Action Network as noted on depositaccounts.com unless you are a resident of certain Louisiana or Mississippi counties. Its more of a local ACS network.
DA indicated:
Membership in Keesler Federal Credit Union is open to anyone who joins the American Cancer Society Cancer Action Network, regardless of residency.
According to CR definitely not the case.
Evelyn
Hint...call the ACS Action Network in MS or LA and tell them you want to join Keesler. I did that back in Feb when their rates were much higher, and they accepted me....they are happy for donations. I can't promise it will work but it worked for me, and it was not difficult.

FWIW I would be leery of locking in for just over 2% for 4-5 years, especially since online bank accounts are available with interest rates not a lot less.
I would choose the 30-month Keesler option over a 5 year CD at that rate, but of course YMMV.

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Re: Best CD rates thread

Post by MikeG62 » Wed May 13, 2020 4:04 pm

Ricchan wrote:
Wed May 13, 2020 2:51 pm
Thanks @KevinM for the information about the CD rate history charts on DepositAccounts!

For those who signed up for the PSECU CDs with monthly add-ons, do you have any plans on what to do if / when your total amount goes over the NCUA insured amount of $250,000, if not already?

I had originally setup the add-on contributions ($25k) with about 6 months in mind, as that would bring me over the NCUA limit. But now with rates being so low everywhere, I wonder if it's worth the risk to continue contributing monthly (and thereby going over the insured amount) just to take advantage of the 3.25% rate?

I admit this is very much a first world problem, and it's not my intention to be insensitive. But I would appreciate hearing your thoughts on this. Am I being too greedy? How real is the risk of PSECU or similar credit unions collapsing? Thanks.
I have two CD's I opened in November that I am still adding to - a jointly owned (with my DW) 36-month CD at 3.25% and an individually owned 24-month CD at 3.0%. I also have three other jointly owned CD's at PSECU opened in October, but as to which no additional funds can be added, and an IRA CD as well.

My original plan was to keep adding to the jointly owned CD (at $20K per month) until the sum total of all our of jointly owned CD's hit $500K and do the same with the individually owned CD (at $30K per month) until it hits $250K. That will happen in about 4-5 months time for both CD's. Then I'd call it a day and leave those CD's until they mature.

However, it recently occurred to me that I can open a tentative trust (POD) account at PSECU (jointly owned with my wife) and transfer in the jointly owned CD. My wife and I can then name our two adult daughters as beneficiaries, which would provide NCUA insurance up to $1.0 million for all assets in the TT account ($250K for each beneficiary of each member-owner). In this way, I can keep funding the joint CD until the month before it matures (Nov 2022).

Additionally, I just got off the phone with PSECU and they confirmed that I can place both CD's (the joint and the individual CD's) into the TT account. While this will have the effect of converting the individual CD to joint CD (which is fine), it will importantly allow me to continue to fund that CD until about a month before it matures while maintaining full insurance coverage. In summary, I now plan to keep funding both add-on CD's until the month before they mature.
Last edited by MikeG62 on Wed May 13, 2020 6:36 pm, edited 1 time in total.
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Kevin M
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Re: Best CD rates thread

Post by Kevin M » Wed May 13, 2020 6:23 pm

Ricchan wrote:
Wed May 13, 2020 2:51 pm
Thanks @KevinM for the information about the CD rate history charts on DepositAccounts!
You're welcome!
Ricchan wrote:
Wed May 13, 2020 2:51 pm
For those who signed up for the PSECU CDs with monthly add-ons, do you have any plans on what to do if / when your total amount goes over the NCUA insured amount of $250,000, if not already?
I designated three beneficiaries for my CDs in taxable, so covered to $750K in the revocable trust ownership category ($250K per beneficiary), which includes POD accounts (PSECU calls a POD account a tentative trust account). I'm above $250K but well below $750K, and don't think I'll get close to that.

I put enough into an IRA CD there to hit about $250K at maturity. This is a separate ownership category, so I'm covered to $250K in the IRA ownership category.

For a taxable account, you could either add one other owner, converting it from individual to joint ownership category, or add two beneficiaries, converting it to the revocable trust ownership category, and be covered up to $500K.
Ricchan wrote:
Wed May 13, 2020 2:51 pm
I had originally setup the add-on contributions ($25k) with about 6 months in mind, as that would bring me over the NCUA limit. But now with rates being so low everywhere, I wonder if it's worth the risk to continue contributing monthly (and thereby going over the insured amount) just to take advantage of the 3.25% rate?

I admit this is very much a first world problem, and it's not my intention to be insensitive. But I would appreciate hearing your thoughts on this. Am I being too greedy? How real is the risk of PSECU or similar credit unions collapsing? Thanks.
I personally would not go over the NCUA limit.

Kevin
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MikeG62
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Re: Best CD rates thread

Post by MikeG62 » Wed May 13, 2020 8:45 pm

Ricchan wrote:
Wed May 13, 2020 2:51 pm
I had originally setup the add-on contributions ($25k) with about 6 months in mind, as that would bring me over the NCUA limit. But now with rates being so low everywhere, I wonder if it's worth the risk to continue contributing monthly (and thereby going over the insured amount) just to take advantage of the 3.25% rate?

I admit this is very much a first world problem, and it's not my intention to be insensitive. But I would appreciate hearing your thoughts on this. Am I being too greedy? How real is the risk of PSECU or similar credit unions collapsing? Thanks.
Wrote this earlier today in another thread...

Since the failure of IndyMac in 2008, very few people with deposits in excess of the insurance limits at failed banks have lost any money.

Source:
https://www.americanbanker.com/opinion/ ... d-deposits

Since IndyMac, there have been 522 failures...Of the 522 failures, just 31, or 5.9%, were resolved in a manner that only protected insured deposits — uninsured depositors were therefore put at risk of a loss. Those 31 banks and thrifts held just 4.9% of the deposits of the post-IndyMac failures.

In the other 491 failures, which held total estimated deposits of $286 billion at the time of failure, uninsured depositors suffered absolutely no loss. Additionally, because these failed banks were resolved through P&A transactions, the depositors and borrowers in these banks suffered minimal disruption in their banking and borrowing activities
.”

This is not to suggest there is zero risk with bank or CU deposits in excess of insurance limits, but the risk is truly quite low. You’d not only have to have deposits in excess of insurance limits at a bank or CU which fails, but that bank or CU would then need to be one of the very few where uninsured depositors suffer a loss.

Having said all this, I try and ensure our bank and CU deposits are, and remain, within the FDIC/NCUA insurance limits. Frankly, given all the different account ownership categories, it’s not that hard to get insurance coverage significantly in excess of $250K.
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mur44
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Re: Best CD rates thread

Post by mur44 » Thu May 14, 2020 12:34 pm

Kevin M,

My wife has one CD at PSECU with me as POD beneficiary. Does this automatically
give $500,000 NCUA protection even in her ONE existing (ADD ON provision) CD?

Could you please clarify?

Thanks

Looking4Answers
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Re: Best CD rates thread

Post by Looking4Answers » Thu May 14, 2020 12:45 pm

mur44 wrote:
Thu May 14, 2020 12:34 pm
Kevin M,

My wife has one CD at PSECU with me as POD beneficiary. Does this automatically
give $500,000 NCUA protection even in her ONE existing (ADD ON provision) CD?
I would think so.
https://www.thebalance.com/payable-deat ... ase-357241

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Re: Best CD rates thread

Post by travlinman561 » Thu May 14, 2020 1:33 pm

mur44 wrote:
Thu May 14, 2020 12:34 pm
Kevin M,

My wife has one CD at PSECU with me as POD beneficiary. Does this automatically
give $500,000 NCUA protection even in her ONE existing (ADD ON provision) CD?

Could you please clarify?

Thanks
I believe you need 2 beneficiaries in order to get $500000 coverage.

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Re: Best CD rates thread

Post by MikeG62 » Thu May 14, 2020 1:41 pm

mur44 wrote:
Thu May 14, 2020 12:34 pm
Kevin M,

My wife has one CD at PSECU with me as POD beneficiary. Does this automatically
give $500,000 NCUA protection even in her ONE existing (ADD ON provision) CD?

Could you please clarify?

Thanks
My understanding is that POD (or what PSECU calls tentative trust) accounts are insured up to $250,000 “per beneficiary per member account owner”. So if your wife is the sole owner and you are the only beneficiary than I believe the insurance caps at $250,000.

See here:

https://www.ncua.gov/files/press-releas ... nsured.pdf
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Re: Best CD rates thread

Post by Kevin M » Thu May 14, 2020 4:23 pm

MikeG62 wrote:
Thu May 14, 2020 1:41 pm
mur44 wrote:
Thu May 14, 2020 12:34 pm
Kevin M,

My wife has one CD at PSECU with me as POD beneficiary. Does this automatically
give $500,000 NCUA protection even in her ONE existing (ADD ON provision) CD?

Could you please clarify?

Thanks
My understanding is that POD (or what PSECU calls tentative trust) accounts are insured up to $250,000 “per beneficiary per member account owner”. So if your wife is the sole owner and you are the only beneficiary than I believe the insurance caps at $250,000.

See here:

https://www.ncua.gov/files/press-releas ... nsured.pdf
Correct.

Individual account with no beneficiaries is in the individual account ownership category, so up to $250K.

Once you designate any beneficiaries for what was an individual account, it is now in the revocable trust ownership category, so $250K per beneficiary for up to five beneficiaries (rules become more complex for more than five). So one owner with one beneficiary is insured up to $250K.

Kevin
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Re: Best CD rates thread

Post by Ricchan » Sat May 16, 2020 12:03 am

Thanks @KevinM and @MikeG62 for all your helpful replies!

I have one family member I can work with in terms of adding a joint owner or a beneficiary. I've played around with this insurance estimator, using the following data:
  • Share account S1 with Fixed CD
  • Share account S2 with Add-on CD
Assuming S2 is larger than S1 (and is thus the target for the higher insurance categorization), It seems the following options are available:

Single owner for both S1 and S2 (current situation):
  • S1 and S2 Insured as Single for $250k.
  • $250k total insured.

Single owner for S1, POD/ITF with (single) beneficiary for S2:
  • S1 insured as Single for $250k.
  • S2 insured as POD/ITF for $250k ($250k for each beneficiary).
  • $500k total insured.
Single owner for S1, joint owner for S2:
  • S1 insured as Single for $250k.
  • S2 insured as Joint for $500k ($250k for each owner).
  • $750k total insured.
So, it seems the best option is to add the family member as a joint owner of the add-on CD. PSECU's forms page provides a form for adding a joint owner, and it seems painless enough.

According to the insurance estimator, the joint owner is required to be a member of the credit union. However, the PSECU form doesn't seem to indicate the joint owner needs to be a member. Perhaps PSECU waives that requirement, or maybe they silently create a membership for the joint owner? Though I would think they would need the joint owner's explicit consent for the latter. Thankfully one of the membership requirements for PSECU is to "Reside in a household with a current PSECU member," which should satisfy the requirement in my situation. So if this becomes an issue, it shouldn't be too hard to resolve.

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Re: Best CD rates thread

Post by MikeG62 » Sat May 16, 2020 7:04 am

Ricchan wrote:
Sat May 16, 2020 12:03 am
Thanks @KevinM and @MikeG62 for all your helpful replies!

I have one family member I can work with in terms of adding a joint owner or a beneficiary. I've played around with this insurance estimator, using the following data:
  • Share account S1 with Fixed CD
  • Share account S2 with Add-on CD
Assuming S2 is larger than S1 (and is thus the target for the higher insurance categorization), It seems the following options are available:

Single owner for both S1 and S2 (current situation):
  • S1 and S2 Insured as Single for $250k.
  • $250k total insured.

Single owner for S1, POD/ITF with (single) beneficiary for S2:
  • S1 insured as Single for $250k.
  • S2 insured as POD/ITF for $250k ($250k for each beneficiary).
  • $500k total insured.
Single owner for S1, joint owner for S2:
  • S1 insured as Single for $250k.
  • S2 insured as Joint for $500k ($250k for each owner).
  • $750k total insured.
So, it seems the best option is to add the family member as a joint owner of the add-on CD. PSECU's forms page provides a form for adding a joint owner, and it seems painless enough.

According to the insurance estimator, the joint owner is required to be a member of the credit union. However, the PSECU form doesn't seem to indicate the joint owner needs to be a member. Perhaps PSECU waives that requirement, or maybe they silently create a membership for the joint owner? Though I would think they would need the joint owner's explicit consent for the latter. Thankfully one of the membership requirements for PSECU is to "Reside in a household with a current PSECU member," which should satisfy the requirement in my situation. So if this becomes an issue, it shouldn't be too hard to resolve.
Ricccan,

Taking the last question first (does the joint owner need to be a member), yes that is absolutely the case. Forget about what is or is not on the PSECU forms. This is a requirement of the NCUA for insurance coverage purposes.

See first sentence here under Revocable Trusts:

https://www.ncua.gov/files/press-releas ... nsured.pdf

See also the paragraph here under “What is a Revocable Trust Account” which begins with the words “Revocable trust coverage is based upon...” and the last bullet point under the “POD Example” which follows that.

https://www.mycreditunion.gov/share-ins ... tor-faq#17

My wife is the other owner on the account we hold jointly at PSECU. When I submit the paperwork to have the individually owned account retitled as a Tentative Trust, the trust will be opened as a jointly-owned trust (with my wife) and will name our two adult daughters as beneficiaries. At that time my wife will sign up as a member of PSECU (with a small deposit). We will then transfer the jointly held currently active add-on CD into the Tentative Trust account. This will result in our having NCUA insurance up to $1.0 million on the funds in the TT account. For others considering something similar, one should note that in order to not run into escheatment issues with the new account for my wife, there will need to be periodic activity in the member share account belonging to her (so a periodic transfer in or out of a nominal dollar amount of funds will do the trick).

Switching gears. You are not clear about who this family member is that you are considering adding, but I get the sense it is not a spouse. Is that right? If so, you should be a bit careful as this can create some issues.

See here (what happens if the joint owner predecease you or if you die while the joint account is still in place - is the joint owner the person you wish to inherit the full account):

https://www.kiplinger.com/article/retir ... -case.html

And here (potential gift tax consideration for those living in states where joint owners can “split off their rights” from other joint owners):

https://www.nj.com/advice/2019/08/my-fr ... s-due.html

I understand your issue Riccan. Prior to the realization I could make these moves with the Tentative Trust account, I was thinking along the lines of your original question - should I just keep funding these CD’s even if the balance exceeds the NCUA insurance limit (given the above market interest rate imbedded in these CD’s). After all, the window of time during which these CD’s would be open with amounts above the insurance limits would be limited (one year in the case of the 24-month CD and two years in the case of the 36-month CD). Note that I included a link to an article in an earlier post above which describes the actions the insurer takes when seizing assets of a failed financial institution to try to protect uninsured depositors. However, I am not sure this is a risk I would in fact have taken (and I am glad I don’t have to keep wringing my hands over it anymore).

Hope this is all helpful to you.
Last edited by MikeG62 on Sat May 16, 2020 11:38 am, edited 1 time in total.
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Re: Best CD rates thread

Post by Ricchan » Sat May 16, 2020 11:04 am

Thanks @MikeG62 for the response! You're right, the family member is an elderly parent. The tax considerations in addition to membership duties (being active in the account) may make it more reasonable to go the beneficiary route, even if it's $250k less insurance. I'll take some time to think this over, as it's not an especially urgent decision. Thanks again!

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Re: Best CD rates thread

Post by Kevin M » Sat May 16, 2020 12:57 pm

Keep in mind that for a joint account with two owners, whether or not there are beneficiaries, the maximum deposit insurance coverage is halved if one of the owners dies. However, both FDIC and NCUA provide a grace period of six months during which coverage is maintained as if the deceased owner were still alive, as long as the account is not restructured (e.g., retitled).

Similarly, maximum coverage is reduced if a beneficiary dies, and unlike for the death of an owner, there is no grace period.

FDIC: https://www.fdic.gov/deposit/diguideban ... owner.html
NCUA: https://www.mycreditunion.gov/share-ins ... imator-faq

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Re: Best CD rates thread

Post by CWRadio » Sat May 16, 2020 3:04 pm

Kevin M wrote:
Sat May 16, 2020 12:57 pm
Keep in mind that for a joint account with two owners, whether or not there are beneficiaries, the maximum deposit insurance coverage is halved if one of the owners dies. However, both FDIC and NCUA provide a grace period of six months during which coverage is maintained as if the deceased owner were still alive, as long as the account is not restructured (e.g., retitled).

Similarly, maximum coverage is reduced if a beneficiary dies, and unlike for the death of an owner, there is no grace period.

FDIC: https://www.fdic.gov/deposit/diguideban ... owner.html
NCUA: https://www.mycreditunion.gov/share-ins ... imator-faq

Kevin
Can you have a joint account in a IRA bank CD? Paul

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Re: Best CD rates thread

Post by MikeG62 » Sat May 16, 2020 3:29 pm

CWRadio wrote:
Sat May 16, 2020 3:04 pm
Kevin M wrote:
Sat May 16, 2020 12:57 pm
Keep in mind that for a joint account with two owners, whether or not there are beneficiaries, the maximum deposit insurance coverage is halved if one of the owners dies. However, both FDIC and NCUA provide a grace period of six months during which coverage is maintained as if the deceased owner were still alive, as long as the account is not restructured (e.g., retitled).

Similarly, maximum coverage is reduced if a beneficiary dies, and unlike for the death of an owner, there is no grace period.

FDIC: https://www.fdic.gov/deposit/diguideban ... owner.html
NCUA: https://www.mycreditunion.gov/share-ins ... imator-faq

Kevin
Can you have a joint account in a IRA bank CD? Paul
If your question is can an IRA CD be jointly held, the answer is no. An IRA is an Individual Retirement Account.
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Re: Best CD rates thread

Post by Kevin M » Sat May 16, 2020 8:14 pm

MikeG62 wrote:
Sat May 16, 2020 3:29 pm
CWRadio wrote:
Sat May 16, 2020 3:04 pm
Kevin M wrote:
Sat May 16, 2020 12:57 pm
Keep in mind that for a joint account with two owners, whether or not there are beneficiaries, the maximum deposit insurance coverage is halved if one of the owners dies. However, both FDIC and NCUA provide a grace period of six months during which coverage is maintained as if the deceased owner were still alive, as long as the account is not restructured (e.g., retitled).

Similarly, maximum coverage is reduced if a beneficiary dies, and unlike for the death of an owner, there is no grace period.

FDIC: https://www.fdic.gov/deposit/diguideban ... owner.html
NCUA: https://www.mycreditunion.gov/share-ins ... imator-faq

Kevin
Can you have a joint account in a IRA bank CD? Paul
If your question is can an IRA CD be jointly held, the answer is no. An IRA is an Individual Retirement Account.
Yep, there are no ownership category tricks to increase FDIC/NCUA deposit insurance above $250K in an IRA.

Kevin
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Re: Best CD rates thread

Post by hudson » Sat May 16, 2020 8:54 pm

Kevin M wrote:
Sat May 16, 2020 8:14 pm
Yep, there are no ownership category tricks to increase FDIC/NCUA deposit insurance above $250K in an IRA.
Kevin
I agree. You probably don't want to open one for $250K. Maybe do the math and open it for less than $250K. Leave enough room for the interest so that you don't run over. I think Kevin M already brought that up above.

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Re: Best CD rates thread

Post by Kevin M » Sat May 16, 2020 10:35 pm

hudson wrote:
Sat May 16, 2020 8:54 pm
Kevin M wrote:
Sat May 16, 2020 8:14 pm
Yep, there are no ownership category tricks to increase FDIC/NCUA deposit insurance above $250K in an IRA.
Kevin
I agree. You probably don't want to open one for $250K. Maybe do the math and open it for less than $250K. Leave enough room for the interest so that you don't run over. I think Kevin M already brought that up above.
Yes, that's what I do.
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Re: Best CD rates thread

Post by hudson » Sun May 17, 2020 8:08 pm

Kevin M wrote:
Sat May 16, 2020 10:35 pm
hudson wrote:
Sat May 16, 2020 8:54 pm
Kevin M wrote:
Sat May 16, 2020 8:14 pm
Yep, there are no ownership category tricks to increase FDIC/NCUA deposit insurance above $250K in an IRA.
Kevin
I agree. You probably don't want to open one for $250K. Maybe do the math and open it for less than $250K. Leave enough room for the interest so that you don't run over. I think Kevin M already brought that up above.
Yes, that's what I do.
If you were taking Required Minimum Distributions from THAT account, you might want to allow for that.

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Re: Best CD rates thread

Post by EvelynTroy » Tue May 19, 2020 2:33 pm

I believe Hudson in an earlier post pointed out The Federal Savings Bank 5 yr. 2.05% CD. They have an A+ financial rating at depositaccounts.com.
I've been procrastinating and not purchasing anything for far too long.
I have a large amount sitting in the Schwab Cash Account earning nothing.
I'm uneasy about going about 5 years, but on the other hand this environment may take a long time until we see CD rates improving.
Any thoughts about going out 5 years - would be appreciative.

I did phone The Federal Savings Bank - very busy so left message to return my call. They did about 5 hours later. Knowledgeable, helpful CR.
EWP is 1 yr. of interest. After you complete the application online you have 14 days to fund the application, with the rate guaranteed.

Alternatively if anyone can recommend anything better I'm all ears.

Thanks. Evelyn

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Re: Best CD rates thread

Post by hudson » Tue May 19, 2020 3:20 pm

Evelyn,
If I had funds that needed investing today, that I wouldn't need in 5 years, I would go with the 2% deal for 5 years.
The other alternative would be a high quality muni fund....but that won't work for everyone.
My plan has always been to just take the best available 5 year deal and go with it. If it turns out bad, I'll just adjust the sails and move on.
I don't have any predictions about the future. If I did, they'd likely be wrong.
That's useful information about the bank!

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Re: Best CD rates thread

Post by EvelynTroy » Wed May 20, 2020 6:17 am

hudson wrote:
Tue May 19, 2020 3:20 pm
Evelyn,
If I had funds that needed investing today, that I wouldn't need in 5 years, I would go with the 2% deal for 5 years.
The other alternative would be a high quality muni fund....but that won't work for everyone.
My plan has always been to just take the best available 5 year deal and go with it. If it turns out bad, I'll just adjust the sails and move on.
I don't have any predictions about the future. If I did, they'd likely be wrong.
That's useful information about the bank!
Thank you Hudson - I'm going to get off my lazy... and get things going and purchase that CD.
I'm like you no predictions about the future. That CD will be safe.
Be safe - Evelyn

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Re: Best CD rates thread

Post by MikeG62 » Wed May 20, 2020 6:25 am

EvelynTroy wrote:
Tue May 19, 2020 2:33 pm
I believe Hudson in an earlier post pointed out The Federal Savings Bank 5 yr. 2.05% CD. They have an A+ financial rating at depositaccounts.com.
I've been procrastinating and not purchasing anything for far too long.
I have a large amount sitting in the Schwab Cash Account earning nothing.
I'm uneasy about going about 5 years, but on the other hand this environment may take a long time until we see CD rates improving.
Any thoughts about going out 5 years - would be appreciative.
While I accept that this is about as good an advertised deal as one can currently locate on Deposit Accounts, I personally don’t find 2.05% for a 5-year lock up particularly compelling. I might do ~2% for up to a 2-year term if I had excess cash I did not need, but don’t think I’d do 5-years. (Note that I did do 2.25% back in March of this year for 17-month term). Of course, it could turn out that this ends up being a good deal over the next 5 years. My crystal ball is not all that clear either. It’s a judgement call.

Personally, I’d lean more toward either (or a combination of) bank transfer bonuses (something like the Capital One Performance Savings Bonus) and/or wait out a promotional CD with more compelling terms than 2.05% for 5-years. That may not end up being a lot more than 2.05%, but hopefully would not require a 5-year lock-up and at a 12-month EWP. In the meantime, get those funds out of an account earning nothing or next to nothing (Ally or Marcus no-penalty CD’s (open a number of them) being a good temporary place for that cash).
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Re: Best CD rates thread

Post by EvelynTroy » Wed May 20, 2020 6:36 am

MikeG62 wrote:
Wed May 20, 2020 6:25 am
EvelynTroy wrote:
Tue May 19, 2020 2:33 pm
I believe Hudson in an earlier post pointed out The Federal Savings Bank 5 yr. 2.05% CD. They have an A+ financial rating at depositaccounts.com.
I've been procrastinating and not purchasing anything for far too long.
I have a large amount sitting in the Schwab Cash Account earning nothing.
I'm uneasy about going about 5 years, but on the other hand this environment may take a long time until we see CD rates improving.
Any thoughts about going out 5 years - would be appreciative.
While I accept that this is about as good an advertised deal as one can currently locate on Deposit Accounts, I personally don’t find 2.05% for a 5-year lock up particularly compelling. I might do ~2% for up to a 2-year term if I had excess cash I did not need, but don’t think I’d do 5-years. (Note that I did do 2.25% back in March of this year for 17-month term). Of course, it could turn out that this ends up being a good deal over the next 5 years. My crystal ball is not all that clear either. It’s a judgement call.

Personally, I’d lean more toward either (or a combination of) bank transfer bonuses (something like the Capital One Performance Savings Bonus) and/or wait out a promotional CD with more compelling terms than 2.05% for 5-years. That may not end up being a lot more than 2.05%, but hopefully would not require a 5-year lock-up and at a 12-month EWP. In the meantime, get those funds out of an account earning nothing or next to nothing (Ally or Marcus no-penalty CD’s (open a number of them) being a good temporary place for that cash).
Thanks Mike, no I don't see 2.05% for 5 yrs. in the least bit compelling - but what we have is what we have as far as this environment. It is always a judgement call when locking in for 5 yrs. for me.

Thought had crossed my mind to do some sort of bank high yield savings or checking - but there was always (at least the ones I saw) some sort of glitch I didn't care for like having to make debit card purchases, or a recurring deposit. Granted I didn't look at many, and surely no expert on this types of accounts. I did last year do a savings acct. with Discover for a $200 bonus and a 2% rate - wasn't long that rate dropped like a rock. That is why I am leary of savings accounts.
Thanks for the nice nudge to "get that money out of next to nothing account."
Evelyn

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