Personally, I don’t deposit funds into a long term certificate of deposit because I’m at an age where it doesn’t make sense from a financial planning perspective. We’re in our twenties so we’re thinking about things like starting a family and buying a home so a three-plus year CD wouldn’t make sense because our situation is changing so quickly. However, once it stabilizes, I see the value in saving money in longer term CDs as a way of planning for the future.

What I do use long term CD rates for is when I make investment decisions. CDs represent a 100% safe “investment” opportunity, so any potential investment is compared against a three or five year CD. If I can get a guaranteed 3% for a 5 year CD, why would I want to invest in something that has risk and only returns 3%?

Top Long-Term CD Rates

The following table lists the top CD rates for maturities of more than 24 months. In general, most will be 5 or 6 year CDs since the longer the maturity the higher the rate.

All of the banks on this list are FDIC insured up to $250,000.

Top Long-Term CD (Certificate of Deposit) Rates from personal finance blog Bargaineering.com.

For the last six months, my Series I Savings Bonds have been earning exactly 0.00% APY interest. If you remember from the Savings Bond Foundation post, Series I savings bonds earn interest based on an equation that has both an inflation rate component and a fixed rate component.

The inflation rate component is set twice a year, November and May, and calculated based on six months of inflation data. The November rate is set based on inflation between March and September, the May rate is set based on inflation between September and March (see how that works out?).

Inflation Component: 1.5325%

Given CPI-U numbers, the semiannual inflation component of all Series I bonds for period between November 2009 and April 2009 will be 1.5325%. This is a great increase over the current semiannual inflation component, -2.78%.

You calculate it by taking the CPI-U value for September and comparing it with the one for March. You can find both reports on this page of inflation data. March 2009 CPI-U was 212.709, September 2009 CPI-U was 215.969, which is a difference of 3.26. Divide that by 212.709 and you get 1.5325%.

Avoid the temptation to multiple it by 2 to get an annual inflation rate because the Series I bond equation uses a semiannual inflation figure to calculate the bond’s rates.

Buy Series I Bonds?

The big question is whether they make a good investment and only you can decide that based on your risk tolerance. If you buy it in November, the yield will be 3.065%. You must hold a Series I bond for 12 months and you will lose 3 months of accrued interest if you redeem it before five years, you’re looking at the equivalent of 15-month CD at 3.065%. The yield is slightly higher if your state has income tax because it’s exempt from state income tax (and federal income tax for qualified educational expenses).

Should you buy Series I Bonds today or in November? That’s a tricky question. We know the inflation component but we don’t know what they will set the fixed rate component to. Right now, the fixed rate is 0.10% and it’s possible for the Treasury to lower the fixed rate to 0.00% (or raise it… but I would doubt that).

Why you might want to: You can buy Series I bonds on the very last day of October and get credit for the entire month of October. You would earn no interest because of the extremely low semiinflation figure but you would lock in a 0.10% fixed rate and you could redeem your bond one month earlier.

Why you might not want to: The composite rate changes every six months based on your issue date. So if you buy the bond this month, you’ll have 6 months of 0% because that’s the rate as of October. When it comes time to reset, then you’ll get a composite rate based on the 0.10% fixed rate and the 1.5325% semiannual inflation rate. It, in a sense, puts you back in time by six months.

Personally, if I wanted to buy more Series I bonds, I would do it in November (November 30th to be exact).

What will MY bond get?

If you’re curious what interest rate your bond will be getting for six months, on an APY basis, you can use my Series I Bond rate calculator to find out. For example, we have I bonds with a fixed rate of 1.00%. With the 1.5325% inflation component, we can expect to see a 4.08% interest rate on our bond. Beats even the generous of CD rates by a significant margin.

This ends your semi-annual update on Series I bond rates.

(photo by allyrose18)

Series I Bonds Inflation Rate Update (Nov 2009) from personal finance blog Bargaineering.com.

What I didn’t disclose to you all earlier, when talking about the bank account firewall, was that I created a firewall account for each individual external account. Creating ING Direct subaccounts is and was so easy, I created one for each external connection. I had one for Paypal, one for E*Trade, one for … the list went on to the tune of about half a dozen accounts. Along the way, I also created a checking account to take advantage of a free money promotional offer that has since expired. Between the CD ladder, the five external accounts, the checking account, and the main online savings account, I knew I had to pare it down.

When I tried to close an account, I had trouble finding a way because there isn’t one listed on the account’s maintenance page. The easiest way to close an ING Direct Subaccount is to transfer all of the money into another subaccount. On the transfer confirmation page, you will be given the option of closing the account or simply leaving the account balance at $0.

ONce you click “Close Account,” you’ll be asked to confirm the transaction, then the account is closed immediately. As you’d expect, you lose access to all of the historical data for that account. If you want that information, you’ll have to review eStatements, which are saved in PDF form.

Unfortunately, you cannot close the Electric Orange checking account this way. To close your Electric Orange account, you’ll need to call their customer service line at 1-888-464-0727, available from 8am to 8pm, 7 days a week.

How to Close ING Direct Subaccounts from personal finance blog Bargaineering.com.

What if you’re money isn’t in a CD because it’s part of a CD ladder, what should you do?

My goal is always to maximize the interest rate while minimizing my headache. Our CD ladder isn’t at ING Direct because they offered the best 12 month CD rates (though they currently do, especially after you factor in the rollover bonus or the new money bonus), it’s because it was the simplest online savings account available when we set up the ladder.

1. Decide whether you want to save this money in a CD. If you intend to buy a house or a car and need the cash for a downpayment, don’t put it back into a CD. If you really want to put it back into a CD, consider a no-penalty CD where you can withdraw your money at anytime.

If you still want to save it, you have two options:

• Renew the CD at your current bank
• Open a new CD at another bank

2. Review interest rates to see if your current bank is offering competitive rates. If your bank still offers the best rates, then then simplest way is the best way – renew it at your current bank. If your bank doesn’t offer the best rate, you have to decide whether opening a new account and transferring the money, which will take several days, is worth the different in interest.

You can use this CD interest calculator to help you decide. 0.5% APY difference on a 12 month CD is only $5 on $1,000 in savings. That’s $5 before you take away part of it for taxes.

Those are the steps I take whenever I’m deciding what to do with one of my non-laddered emergency fund CDs mature.

What To Do When Your CD Matures from personal finance blog Bargaineering.com.

Below, you will see a series of links to ING Direct and each one is an account referral link good for one $25 bonus per new customer only. Each link will only work for one new account so if you click the link and it says “We’re sorry, but the referral link within the email you received has expired and is no longer valid. We recommend that you contact the sender and ask them to re-send the referral email. Or click ‘Continue’ to proceed with the application process without the account opening bonus.” then please move onto the next one. As links are used, I’ll clean up the page such that only the good links are left.

If you use an expired link, you will not get the bonus. Clear the cookies from your browser before you try any of the links or they may appear to have “expired” but still be valid.

If you do not deposit $250, you will not get the bonus. If you still want an account, please use this link.

ING Direct Savings Accounts

1. ING Direct $25 Savings New Account Opening Bonus
2. ING Direct $25 Savings New Account Opening Bonus
3. ING Direct $25 Savings New Account Opening Bonus
4. ING Direct $25 Savings New Account Opening Bonus
5. ING Direct $25 Savings New Account Opening Bonus

If you want to get in the queue to have your link posted, you can peruse the Bargaineering Bucks Store.

$25 ING Direct Signup Promotion Bonus from personal finance blog Bargaineering.com.

So why did I make a video about the “true power” of compound interest? Watch.

As a quick aside, this video was shot with a better camcorder and improved lighting. If there are any video mavens out there, I’d love to hear your tips on how I could improve the quality of these videos… short of replacing me, of course!

As you saw in the video (or didn’t, I’ll assume you watched it!), waiting just a single year really puts you at a disadvantage to your better saving peers. So many people delay their savings because of life circumstances, and that’s fine, but you have to realize that you’re giving up 40 years of interest, not just one.

So, if you can save a few dollars today, do it. By the time tomorrow rolls around, you’ll have lost out on a long time.

BVC #21: True Power of Compound Interest from personal finance blog Bargaineering.com.

There is only one thing more annoying than falling interest rates, it’s rising interest rates after you’ve opened a new certificate of deposit! With CDs, if you close one before it matures, you will pay a penalty of three to six months’ interest. Again, it’s not bait and switch, it’s just the nature of fluctuating interest rates.

10 Day Rate Guarantee

That’s why it’s kind of nice of Ally Bank to offer a ten day rate guarantee on all new and renewing certificates of deposit. If the rate goes up within ten days of you opening or renewing a CD, you get the new rate automatically. You don’t have to do anything, your rate is automatically increased.

When should you open a CD? As long as I’ve been looking at Ally Bank CD rates, they usually change their rates on Fridays. If you want the maximum window then you want to open your CD on a Wednesday or Thursday. This gives you two potential rate changes in your ten day window.

What else can you do? You can open up a bump-up CD, which lets you increase the rate once per CD, or a triple option CD, where one of the options is the bump up provision. The rates are usually lower than the same maturity CD at the same bank, because you have more options, but it can alleviate your fears of being locked into a lower interest CD.

In the end, remember that interest rates generally don’t move around a significant amount. Lately we’ve only see changes of 0.05% or 0.10% in either direction. Over the course of a year, an extra 0.05% APY on a CD with $1,000 is only fifty cents!

(Photo: puntodevista)

Ally Bank Ten Day CD Rate Guarantee from personal finance blog Bargaineering.com.

Now that we’re in the simplification phase of our lives, something has to give and unfortunately it’ll be FNBO Direct today. I do have to say, the customer service lines were very fast and I appreciated talking to someone in Omaha (the “O” in FNBO). It’s nice to see a business provides jobs locally, especially in our economic environment.

How to Close an FNBO Direct Account

Much like HSBC Direct, this process was simple too. Log into your account and click on the “Contact Us” link at the bottom of the page. On the Contact Us page, look at the left side of the page and you should see a “Account Closing Request” link. It’s above the banners between the “Online Message Center” link and the “Wire Request Link.” Click it.

The Account Closing Request page has a couple of your standard account closure questions: the account to close, reason for closing, and how you’d like your balance. I requested it by Cashier’s Check. According to the CSR, the closing process takes 1 – 3 business days and a check for your account balance is sent in about a week.

Another step closer to a simpler financial life.

How to Close an FNBO Direct Account from personal finance blog Bargaineering.com.

I opened a checking account at some no-name bank in TN to get $100 after setting up direct deposit. Last time I did this, I ordered some checks through a cheap online site for about $5 so I could get ONE check to send to my HR dept and set up the DD.

But I had a thought this time around – could I send myself a small check (say, $1) through the bank’s free BillPay system and then void that check and use it to set up the DD? It should have all of my bank info on it like any other check and a voided check is a voided check, right, no matter how much it was for or who it was to? It would save me only $4 or so but $4 is $4 and it’s actually less work.

I don’t see any reason why this wouldn’t work (I confirmed with a Bank of America representative that the check does contain the ABA routing number and your account number, the details HR needs). Just send yourself a check for a penny, write void on it when you receive it, and then use that as your voided check. I know you can send a check for a penny because my friend did that to me once when billpay first got started. Why pay for something you don’t need?

I would do this if you only need a handful of checks. If you need more, always buy checks online. If you buy them from the bank, they always overcharge you and send you way too many checks anyway.

Use Billpay To Get A Voided Check from personal finance blog Bargaineering.com.

At the moment, URLZone can only infect Windows systems using Firefox, Internet Explorer 6, 7 & 8, or Opera web browsers. Computers are infected when you open an e-mail, click on a website distributing malware, or visit an infected website using one of those browsers. When you visit a targeted bank, and it’s thus far been limited to German banks, the trojan transfers money without you even knowing.

This is the first Trojan Finjan has come across that hijacks a victim’s browser session, steals the money while the victim is doing online banking, and then covers its tracks by modifying information displayed to the victim, all in real time, Ben-Itzhak [chief technology officer at Finjan] said.

This is scary.

Banking Trojan steals money from under your nose [CNet News]

(Photo: hendricksphotos)

New Bank Trojan Virus Steals Money from personal finance blog Bargaineering.com.

What is a triple option CD? A triple option CD is a CD that combines the features of a bump up CD with a no-penalty CD. For those enjoying the zoo analogy, the triple option CD is a modern day Chimera. With a triple option you can usually:

1. Make another deposit into the CD,
2. Increase your rate once during the original CD’s term,
3. Withdraw part of the CD under certain circumstances.

The specifics of the CD will depend on the bank offering them. For example, some banks offering a triple option CD will only let you withdraw up to 50% of the original CD for a medical hardship. Some let you withdraw up to 50% for no reason whatsoever. Some let you make an additional deposit of up to 50% of the original deposit. The amounts will often change but the three features will remain the same.

Where does the triple option CD fit in with other CDs? Triple option CDs usually have a maturity term of thirty-six months and a higher minimum deposit than other CDs offered at the same bank. As for the interest rate, triple option CDs appear to have rates similar to standard 36 month CDs (I’d expect them to be slightly lower, reflecting the additional flexibility).

Do you have a triple option CD? Or does your bank offer one? I get the impression these aren’t very common now.

What is a Triple Option CD? from personal finance blog Bargaineering.com.

Perhaps.

But I can say, with a little data to back me up, that a bank on the verge of failure may not show it in its CD interest rates. Corus Bank, one of the banks that failed on Friday, was on my list of best CD rates. Since June, I’ve been populating that table with the help of a database on the back end. That also means that I have historical rate information, which will come in handy to see if we could’ve predicted a bank failure based on CD interest rates.

Corus Bank CD Rates

Here’s what their rates have been for a 12 month CD:

• June 8, 2009: 2.60%
• June 18, 2009: 2.25%
• June 30, 2009: 2.20%
• July 10, 2009: 2.15%
• August 4, 2009: 2.00%
• August 16, 2009: 2.00%
• September 7, 2009: 1.87%
• September 11, 2009 (day of failure): 1.85%

As a reference, the rates on other CDs decreased at about the same rate (I didn’t perform any statistic analysis, just eyeballed the data). In other words, if you looked entirely at the CD rates, you would’ve had no idea Corus Bank was about to go under and cost the FDIC about $1.7 billion. Here is where I keep track of CD Rates on Bargaineering.com.

In the end, this doesn’t really tell us much other than a bank that is failing doesn’t necessarily boost its CD rates to try to gain more deposits. I figured I had the data, might as well take a look at it right?

Do CD Rates Rise Before Bank Failures? from personal finance blog Bargaineering.com.

HSBC Account Closing Process

Closing the HSBC online savings account was simple. Log into your account and find the BankMail button in the left navigation menu. It will be one of the last buttons at the bottom. When you click on it, another window will pop up (disable pop-up blockers if you don’t see the window appear) for you to create a new BankMail.

For the subject of the BankMail, select “Other.” For the message, you will need to provide three pieces of information:

• What you want them to do (close the account);
• Why you want them to do it;
• How you want the remaining funds to be sent to you.

My message:

I would like to close this account because the interest rate is too low. I would like to receive the remaining funds as a check sent to my address on file. Thank you.

I had $35 in my account so I requested a check. If I had more, I would have electronically transfered out everything and then requested that by check. You probably could transfer it down to $0 as there is no account minimum but you could leave $1 just to be sure.

I received the follow within a few days:

Dear Jim Wang:

Thank you for contacting HSBC Bank USA, N.A., the world’s local bank.

We regret to hear that you want to close your Online savings account. However, we respect your decision and will forward your account closure request to the Online Processing Center. Please allow 2 business days for the account to fully close. The amount in your account will be mailed to the address on record. Please allow 7 to 10 business days for delivery.

It’s easy to reach an HSBC associate to answer your questions. To send a secure BankMail, use the BankMail link conveniently located in the left gray navigation menu while you are logged into your Personal Internet Banking service. Our Customer Relationship Center is also available, 24 hours a day, 7 days a week to meet all of your HSBC banking needs.

Sincerely,

XXXXX XXXXX
Internet Banking Specialist

That’s it, another account consolidated. One step closer to a simpler financial life.

How to Close an HSBC Online Savings Account from personal finance blog Bargaineering.com.

I think that as I’ve gotten older, the amount of headache I’m able to stand has dropped significantly. A few years ago, I’d be willing to stay on the phone for an hour with a Comcast rep arguing down my bill. I’d research purchases for hour, then wring my hands for days, and then research some more before pulling the trigger. Now? With all the other headaches I have, the last thing I want to do is add to the mix!

Ultimately, I feel that based on the nature of the relationship I have with banks, online savings accounts are worth it.

Here’s what you’re in for when you open an account with an online bank:

• Phone and online customer service only: You can’t go to an online bank, so all of your contact with the bank will be through online chats, emails, or over the telephone. You won’t be able to go into a branch and talk to a teller or a representative. You won’t be able to diagram what you want to do on a piece of paper.
• You won’t build a relationship with the bank. If you use a community bank or local credit union, you know what it means to build a relationship with a bank. You know the tellers, you know the manager. You talk to someone who knows you, what you want to do, and wants to help you on both a personal and professional level. You get none of that at an online bank no matter what they promise. With online banks, the relationship is strictly transactional.
• Interest rates fluctuate all the time: Online banks are very fluid and in our current economic environment, don’t be surprised if rates drop the day after you deposit funds. Remember, a savings account does not guarantee its interest rate. The rates will be higher than a brick and mortar bank, reward checking accounts excluded, so you still win.
• Higher probability you’ll get phished: Scammers send “phishing” emails pretending to be the bank in an attempt to get you to log into a fake bank account. They steal your information and then steal your money. We’re all savvy enough to know that Bank of America won’t email us, but online banks email you all the time. As you get used to this, you may inadvertently click on a phishing email and not even realize it.
• Infrequent website outages: No website has 100% uptime year-round and when your main interface with a bank is through the website, there will be times when you want to log in but cannot. In recent memory this has happened less than a handful of times (never twice at once bank) but just once is almost too much.

Do you have an online savings account? Is there a hassle I missed?

(Photo: jbhill)

Are Online Savings Accounts Worth It? from personal finance blog Bargaineering.com.

Ally Bank’s Savings & CD Rates

• As of August 28th 2009, their current online savings account interest rate is 1.75% APY.
• As of August 28th 2009, their current 9 month CD rate is 1.55% APY.
• As of August 28th 2009, their current 9 month no-penalty CD rate is 1.85% APY.

Rates are subject to change, here are the current Ally Bank CD rates.

Why Is This Weird?

Typically, your online savings account interest rate should be the lowest of the three. Next would be the 9 month no-penalty CD rate followed by the regular CD rate. You should get a lower interest rate on the account with the most flexibility. Since you withdraw money from a savings account at any time, you should be paid the least amount of interest in that account. Since you can withdraw your money from a no-penalty CD at any time without penalty, it should have a lower interest rate than a regular CD, where you would have to pay a penalty to access your funds.

Ally Bank has had this interest rate irregularity for a while now but recently it’s come back in line.

So What?

If you have money in Ally Bank’s online savings account, you should open a 9 month no-penalty CD immediately and transfer all your funds into that CD. Should the online savings account interest rate ever increase past the no-penalty CD, then you could liquidate the no-penalty CD without penalty. If you need the money, you can liquidate the no-penalty CD.

In fact, the best strategy would be to open up multiple no-penalty CDs so that if you do need the cash you don’t have to close out one big CD. Ally Bank does not have a minimum for CDs. For example, if you have $5,000 to save and you aren’t sure if you need the money. Open up five $1,000 no-penalty CDs. If you need $500, you can just close one of the CDs. If you opened up one single $5,000 CD, then you’d have to liquidate the whole to get access to just $500.

Am I missing something?

Ally Bank Savings & CD Rates Confuse Me from personal finance blog Bargaineering.com.