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Bank CD Rates

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How much money do you have sitting in a savings account? $500? $1,000?

Do you have plans for that money? If not, it should be in a certificate of deposit at your bank. If your bank doesn’t offer good CD rates, then you should open a CD with an online bank and take advantage of their better interest rates. If you don’t think you have enough money, you’re wrong. You can open a CD at an online bank with a single dollar.

One dollar.

In general, certificates of deposit are loss leaders for banks. They’re like the produce sales at the grocery store, they are designed to get you to open an account and start a relationship with the bank. Ever notice banks will give you free checking if you set up a direct deposit or start using billpay? It’s to solidify your relationship (because it’s a pain to change your direct deposit). The CD is that shiny apple just begging you to come in and check out the produce.

Best Bank CD Rates

I have a database of the best CD rates that I try to keep updated as regularly as possible, and with that database I’ll spit out the best rates for CDs with maturities of less than or equal to two years.

If there is a bank you’d like to see listed on this page, please let me know!

Longer Maturities, Higher Rates

Also, in most cases, the rates a bank will offer on a certificate of deposit will increase as the CD’s maturity length increases. A 7 year CD will always have a listed higher interest rate than one that has a maturity of 6 months. There are a couple reasons for this. First, there is a fixed cost with opening a new CD that is the same for one that will last six months or sixty. Part of that cost will be absorbed by lowering the interest rate and that makes a greater impact on shorter maturities.

The second reason has to do with inflation risk. Your deposit is FDIC insured against loss but it’s still at risk from inflation, which erodes the value of all the money that you have. Longer CDs will have higher rates because there’s a bias towards inflation. In the history of the United States, there have been periods of deflation, when your money has gotten more valuable, but they have been very rare. Inflation is not only expected, but encouraged for a healthy and functioning economy, and interest rates reflect that.

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32 Responses to “Bank CD Rates”

  1. Steven says:

    Guess I’m lucky with a local credit union (EFFCU) still offer 3.05% interest on my High yield CHECKING account. Granted they are having little problems, and recently got taken over by another credit union, but I think it’s a safe gamble.

    • Jim says:

      Is it a reward checking account with debit use requirements? I would venture to guess it is (though that’s still great), reward checking accounts are becoming more popular these days.

      • Steven says:

        Yes, it is rewards checking, has a debit use requirement. But to me, it’s not a hassle because I pay for everything with plastic and I have the discipline not to blow my entire account and pay off the credit card every month.

        I generally use it for the smaller purchases I make, like milk or lunch, to maximize the cash back I receive on my credit card. What’s nice is that you can check how many purchases you have made, so once I hit 12, I use the credit card for the rest of the month.

        And if you can’t hit 12 debit purchases regularly, I guess you could always make 12 separate purchases of chewing gum.

        • Jim says:

          I don’t think it’s a hassle either, I think it’s a perfectly fair way for the bank to pass along some of their profits to you.

  2. Bradford says:

    “Inflation is not only expected, but encouraged for a healthy and functioning economy, and interest rates reflect that.”

    Boy, I couldn’t agree more. But when do you expect that situation to happen again during these “rare times” of ours?

    • Jim says:

      I think things will recover pretty quickly and the scary part will be how the Fed handles the ensuing inflation because of recent monetary policy.

  3. Dave M. says:

    I recently changed my CD strategy. Till this week I had been keeping all my cash in my money market accounts because their APYs are so close to the short-term CD rates. But they’ve all dropped below 2% now, and I’ve been trying to figure out a way to get a higher return but still have access to the funds in case of financial emergency (such as being laid off) or a healthy rebound in the MMA/CD rates.

    So, I just opened a 5-year CD at 3.6% APY. I put in all of my cash that I don’t have immediate plans for spending this coming year (which is essentially my emergency fund). If I need to access the money in the CD, the penalty is only six months of simple interest on the withdrawn amount.

    I did some calculations, and found that the only scenario where I would have done better with the MMA or short-term CD is if I had to withdraw the entire amount from the 5-year CD in the first year.

    If I withdraw the funds at the end of the second year, my effective APY (actual APY less the penalty) is 2.7%, which is still better than any of the current 24-month CD rates, and almost a full percent higher than my current MMA rates. The longer I wait before having to access the money, the less effect the penalty has on my effective APY.

    So, I’m locking in a high rate (relative to current rates), which protects me from rates continuing to slide. If rates rebound before the 5-year term ends, I can easily pull that money out of the CD and put it elsewhere.

    • Bradford says:

      I’m with you, Dave. Adopting such a long-range strategy on my personal finances might result in the general economy rebounding beyond all expectation, but heck, I’m willing to be the guinea pig (or scapegoat), if it’d just happen. Even with the best projections, when will we see a one-year CD going for 3.6% again? How fast is “pretty fast”?

  4. Tony says:

    Are you suggesting that an emergency fund shall be in a CD instead of a Online Savings Account, even if the savings account is earning around 2% interest? How liquid does an emergency fund need to be? Would putting a portion of it into a site like Lending Club be wise? (The loans are for 3 years, but you can trade them in early if you need to.)

    • Jim says:

      I recommend you ladder it in a CD ladder so you can maximize your return. I wouldn’t put a portion of it into LendingClub because LendingClub notes are not 100% principal protected. Emergency funds are meant for emergencies, not investing.

  5. Jim says:

    I’ve also checked into those “no penalty” CD’s. Ally bank has them at 2% or better and if you close the account, you receive interest through the date of closure. So, if you think you may need some of the funds, open up multiple accounts (I asked and it is OK) so I’m opening up 10 $5,000 accounts and if I need cash, I just need to close one of them with no penalty.

  6. lostAnnfound says:

    Both of our kids have CDs at our credit union (Polish National). They had a special going for 5 months at 1.85%. It’s a bit better than the local banks in the area.

    • lostAnnfound says:

      Also 24 month is at 2.10%. Any CD can be opened with a $500.00 minimum.

  7. Anthony says:

    Two things to note here:

    1. With Ally Bank, you can technically open a CD for $0. I’m not sure what the rules and restrictions are, but they are heavily promoting no minimum CD’s.

    2. I have my money (that is, my more liquid money) spread into rewards checking, online savings, and CD’s. This allows me a mix of better rates and easier access to cash. It may not be the most financially sound thing to do, but it’s what works for me.

  8. My Journey says:

    Jim,

    I don’t get it! If I have an extra $500 bucks liquid and get .5% higher rates but have to lock it up for 2 years…why would I do it???

    Doing the (simple) math:
    $500 X 1.5% = $7.50 for the year in interest and I get to access it at any time no penalties no problems

    $500 X 2.5% = $12.50 PRE TAX for the year in a CD where I will have hassles and penalties for opening it up

    I just don’t see why I would Lock up money for 5 bucks pre-tax or post tax. You might say, “MJTM, lets add some real cash behind it.”

    So, if I had $50,000 in liquid emergency savings:
    $50,000 X 1.5% = $750
    $50,000 X 2.5% = $1,250
    Lets assume an effective tax rate of 20% then for the priviledge of locking up $50,000 for 2 years you get an extra 400 bucks?

    WHY?

    • Dave M. says:

      $400 for 20 minutes’ work, that’s why.

      Just get a CD with a small penalty for early withdrawal, then your money’s not “locked up”. Most CDs I’ve looked at penalize 3 months’ simple interest on the amount withdrawn if there is a year or less left to maturity, 6 months for one to five years left.

      So, if no emergency arises, you get a few hundred extra bucks in your pocket. Worst case scenario, something comes up and you have to dip into the CD, then the penalty drops your effective yield, but you’re almost certainly no worse off than you would have been with the savings account.

      • My Journey says:

        First of all we are talking about $400 when you have liquid $50,000. I have absolutely NO stats on it, but I am going to assume most Americans do not have $50K liquid, but I could be wrong.

        When we are talking about $500 or $1,000 you are talking about less than a McDonald’s value meal to lock up your money (I see that you are arguing what that penalty is, but when we are talking about a net gain of $5 bucks ANY penalty is likely to be substantial in comparison).

        • Dave M. says:

          Don’t get me wrong, I completely agree that there’s a point where the gain isn’t worth the extra time setting up a CD. I was simply pointing out that in your $50,000 emergency savings example, there’s no reason not to spend a few minutes putting that money in a CD and get a better return.

  9. Mike Pastore says:

    It’s always a better move to open a CD even with a single dollar because from there, you can gradually save your money. You don’t have to deposit bigger amount at first. Depositing small amount frequently will always result to big savings at the end of the day.

    • dilbert69 says:

      Most CDs cannot be added to, so your $1 CD will remain $1 until maturity.

      • MoneyNing says:

        You can always just buy more CDs. In some way, it seems like account and organizational overload but if you open them within the same account, it’s just a list within the same screen which is manageable IMHO.

        • dilbert69 says:

          This depends greatly on your bank. Also, if you use Quicken and enter all your transactions manually, as I do, it can be quite a bit of overhead.

          • MoneyNing says:

            When I say account, I actually mean the same bank. These online banks usually have a list of all your accounts under them. I’m not sure if they all do that but at least, from personal experience, that HSBC, Etrade, Ally, and ING all list them conveniently on one screen.

            Also, you need to start exporting them into your Quicken instead of doing it manually :) Even if you enter them manually, you really only need to do it once when you set it up. It’s some work but I’d say it’s worth it if you can get more interests out of the work (just don’t literally open a CD every time you receive one dollar!!)

      • Jim says:

        I don’t think any CD can be added to.

        • dilbert69 says:

          Some banks have (at least in the past) offered add-on CDs, but most do not. And I’m pretty sure the add-on CDs don’t have the most competitive rates.

  10. Given that most of the listed CDs have 24 month maturities, dont’ forget to “ladder” the terms. So if you have $10,000, rather than putting it all in one CD with the highest rate, better to spread it out by investing $1,000 in 10 different CD’s, 2-3 months apart. That way you’ll always have CDs coming due to be rolled over if interest rates should rise.

    And given that rates are currently very low by the standards of the past 30-40 years, now is an excellent time to prepare for a shift in the trend.

  11. dilbert69 says:

    I learned the hard way that interest in multi-year CDs is deemed by the IRS to have been paid annually, not at maturity. Therefore, if you have a five-year, $10K CD earning 3% and you’re letting it compound rather than taking the interest payments in cash, at the end of year 1 you’ll have $300 in taxable income but no way (short of liquidating the entire CD) to access that income to pay the tax (my combined state/federal tax rate is about 40% or $120; yours may be very different). So I have to come up with $120 for the taxing authorities out of my wages or savings, and slightly more in years 2-4. It would be nice if a bank would let you compound 60% of the interest and take the other 40% in cash, but I’ve never heard of one that would. Has anyone? Obviously this isn’t a huge problem on a $10K CD, but on a $100K CD, I would have to have extra withheld from each paycheck to make it work.

  12. eric says:

    What sad, sad rates. :(

  13. Damon Day says:

    You said it eric, remember the good old days when Ing was paying 4.5% and a little higher on their savings accounts? That was only a few years ago. My how times have changed.

    • Jim says:

      I remember when savings accounts yielded 5%. 5%!!!! Those were nice… unfortunately, I think we will be returning to those days but only because inflation will spike.

  14. Dustin says:

    Jim

    I have always thought a monthly comparison of CD rates and high-yield savings accounts would be nice information.

    Thoughts?
    Dustin

    • Jim says:

      I think you had mentioned this earlier and I tried to find data but couldn’t. However, now all my interest rate tables are pulling from a database, which means in about a year I’ll have at least a little historical information to play with.


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