Comments on: Certificates of Deposit Aren’t Worth It

By: Jerry Maguire

Jerry Maguire — Wed, 08 Mar 2006 01:40:11 +0000

I know you are not willing to be paid an extra $17.50 a year to not really be able to get to your money. But what if it was 10% or 15% or even 17%? Apparently, a lot of people are willing to lend other people that they don’t know money. I recently stumbled upon Prosper (www.prosper.com), which is a peer lending site. It is unreal that some people are looking to borrow money and willing to pay a high percentage. And other people are even more than willing to lend it?!

By: Mark

Mark — Mon, 27 Feb 2006 04:06:32 +0000

Two points:

1 – You can still get to your money, but you will give up 3 months of interest. So, you are able to lock in a rate and you have to pay as small penalty (loss of interest) if you need the money. Not a bad trade for a locked in rate.

2 – You should always look at inflation and real returns. You have to put it somewhere, so that you can keep up with inflation. Here is what you should do.

Rate of return * (1 – marginal tax rate) – Inflation = Real Return

Example: 4.75% (1 – 25%) – 2.5% = 1% real return

Taxes and inflation kill you, but at least you maintain buying power.

By: D-Man

D-Man — Sun, 26 Feb 2006 00:57:57 +0000

This post is ignorant non-sense. First of all you are giving returns in real dollar figures without specifying the initial investment amount which would be $1000.00 for the numbers you are using. So $17.50 per year extra is not worth it to you? If you had $500,000.00 in a CD that would amount to an extra $8750.00 per year, is that worth it to you? Its such a non-sensical way of talking about return rates.

You don’t put every last dollar you might need in the next couple years into a CD. If you don’t have enough reserve cash to say you won’t need that money for a couple years then you don’t use a CD. Thats basic. If all the extra cash you have to put in on fixed interest is $1000.00 then CDs never make sense. If you have $500,000 of Cash sitting around that you don’t want to invest in something more risky and over the years you can work into a CD ladder that has 100,000 coming due every year over a 5 year period then you really don’t have your money all locked up and as the one responder said, what happens if the economy goes into recession in the next few years and short term rates head back down to 2%. That 5.75% at Pen Fed is looking pretty good then.

By: fivecentnickel.com

fivecentnickel.com — Tue, 31 Jan 2006 05:03:48 +0000

Weekly Roundup – 01/27/06

Today marks the end of a busy first week at the MoneyBlogNetwork� What follows are some links to articles that I found to be particularly interesting around the network and elsewhere�

By: personal finance advice

personal finance advice — Tue, 24 Jan 2006 01:27:29 +0000

I believe the Orange account regular rate is 3.8%, not 4.0% (at least that was what it was before the promo started)

By: Chrees

Chrees — Mon, 23 Jan 2006 19:31:26 +0000

One possible benefit from having a CD ladder of some sorts is that it probably encourages a ‘hands-off’ attitude toward that money. If it is sitting in the savings account where it could be easily transfered to your checking account, the temptation to do so is a little greater (at least to me) than if you know there is a penalty involved.

By: thc

thc — Mon, 23 Jan 2006 18:50:17 +0000

What if I buy a two year CD today at 4.75% and a few months from now money market rates start falling. I’m locked in at 4.75% and you’re getting 2-3%? Who’s the smart one then?

By: Wandering Indian Monk

Wandering Indian Monk — Mon, 23 Jan 2006 18:38:34 +0000

I agree with you but the CD seems to be the only possible way for non-residents to save some money. Is there another avenue that these folks could use to get a better return on their money?

I wrote a blog sometime ago on the choices that non-residents have in getting a better return on their money. You can find that post at http://wanderingindianmonk.blogspot.com/2006/01/investing-options-for-non-residents-in.html

By: Amanda

Amanda — Mon, 23 Jan 2006 17:19:39 +0000

I also have never felt like the benefit of increased return offered by a CD offset the downside of having your money tied up for 2 years or so. The APY on the CD just isn’t high enough to make it worth losing the liquidity on that cash…

By: Loi Tran

Loi Tran — Mon, 23 Jan 2006 17:07:20 +0000

I don’t think CDs are great investments either. I’d rather put my money in an online savings account. I’d like my money to be liquid and if I don’t need my money for awhile, I’d put it in an investment vehicle that would have the chance to offer higher rewards.