The Certificates of Deposit Zoo

ZooFor the longest time I thought a certificate of deposit came in one flavor – vanilla. I deposit some money into a CD, I wait until it matures, and then I decide whether I want to put it back in or do something else. Online banks offer better rates than traditional and you can get fancy by creating a CD ladder, but at the core a CD was a CD was a CD. Then I learned about Ally Bank’s no-penalty CD that lets you close a CD before its maturity without losing interest. OK, that was interesting, but it wasn’t all that exciting.

Then today, I read this Bankrate article about the different types of CDs and was surprised at all the options. I guess I had heard about several of them in the past but dismissed them as hokey (callable CDs? I’ve heard of callable bonds but never CDs). I think some of them are clever just to be clever (and so they can list more rates?) but overall it’s kind of a dry read… so I tried to make it a little more interesting.

How about we take a visit to the Certificate of Deposit Zoo?

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Ally Bank Review

Ally BankIn mid-May, GMAC Bank changed its name to Ally Bank. With General Motors in the news every day for something negative, it’s hard to do business when everyone thinks you’re about to go out of business. The funny thing about it all is that GMAC Bank’s parent company, GMAC Financial, hasn’t been a part of General Motors for several years. When you have financial companies in distress and auto companies in distress, a bank that people think is inextricably linked to auto company is in some deep trouble.

So, they changed their name.

But are they a good bank to do business with? Let’s find out.

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Comparing Fixed Annuities & Certificates of Deposit

Hand Painted Piggy BankWhen I first opened up my Vanguard account a few years ago, I requested all sorts of fancy investment brochures. I had just started Bargaineering and had a voracious appetite for financial information and fancy words like annuities, in all their flavors, really intrigued me because I had never heard of them. One of the books I requested was Vanguard’s booklet on annuities, an investment vehicle I would later learn is rife with ripoffs and unscrupulous characters.

I never read the booklet until my wife and I were cleaning out some documents and they remind me a lot of long term CDs, with a few wrinkles. If there’s anything I’ve learned in the last few years is that the financial community has a funny way of coming up with a million different ways to do the same thing, if only to be able to say they have a hot new investment option for you!

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 Personal Finance 

Bank Services More Important Than Interest Rate

A few weeks ago I asked for your opinion of the best high yield savings account and the one thing I learned something very interesting. With interest rates as low as they are, with many banks offering less than 2%, it’s the other services and amenities that dictate which bank you’ll work with.

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Protecting Money With CDARS & Treasury Notes

Fat Wad of CashFor the last few months, until Congress raised FDIC insurance to $250,000, a lot of people were absolutely freaking out about their banking deposits. The largely symbolic move from $100,000 to $250,000 affected practically no one at that point but it made me wonder how the wealthy protected their liquid assets. I didn’t consult with any professionals on this but there are two very simple ways: CDARS (Certificate of Deposit Account Registry Service) and Treasury notes.


The Certificate of Deposit Account Registry Service is something that your bank may offer and it can protect your deposits for up to $50 million. The program is very simple and essentially handles the paperwork of opening up Certificates of Deposit at multiple banks. There is a “loophole” in the FDIC insurance in that it covers you for $100,000 ($250,000 until December 2009) per person per institution. CDARS offers $50 million in protection because they open up CDs at multiple partner institutions. You could do it yourself, but they are simplifying the process and likely taking a little bit in interest to pay for expenses and make some money (I wonder how those rates compare with the best CD rates I’ve found?).

Treasury Notes

All Treasury Notes are backed by the full faith and credit of the United States government. Should that level of infinite insurance fail, the dollar would be worthless and your last concern would be over your deposits! We saw many institutions rush to put their money in short term notes when the credit crisis hit its apex a month or so ago and that was because those notes are protected 100%. As a consumer, you can buy Bills, Notes, Bonds, and Treasury Inflation-Protected Securities (TIPS) through Treasury Direct, the Treasury’s online management system.

For people like you or me, opening up a few high yield savings accounts will probably be sufficient to cover our liquid asset protection needs.

(Photo: refractedmoments)

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