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 If I need to access the money in the CD, the penalty is only six months of simple interest on the withdrawn amount.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 don’t come out ahead is if I had to withdraw the entire amount from the 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.

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.

In any case, Ally Bank’s 9-month no-penalty CD is still better than their 9-month traditional CD. I will be investing my monies there until a better rate comes along.

9-month no-penalty CD’s are also a decently good vehicle to build a CD ladder. You can earn better than online savings and can transfer from the no-penalty to a traditional CD when you want to.