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For the past few months, I've maintained this list of CD rates by hand. That worked fine for a while, but interest rates change often, and I prefer spending my time writing about personal finance.
Now, you can find daily rate updates on the highest cd rates using the certificate of deposit rate finder here. This tool monitors rates from over 200 banks and displays the top 50 highest rates. See who's currently offering the highest rates on CDs by selecting "See Rates."
The original post below will still be updated on a regular basis.
Compare CD Rates
Version of Original Post Below
The Online CD rates (certificate of deposit) on this page are current as of 7 January 2010. I’ll update them regularly in the future.
As we’ve seen recently, the rate of personal savings are increasing. But also recently, the active commenters on my high interest savings account page have become discouraged. Interest rates continue to drop, and they feel like they’re not getting good value for their money. “I’m now considering just getting a CD because I’m so sick of all this nonsense with the daily savings account rates!” DreaDrea wrote.
Current CD rates have also fallen, but remain high in some corners. For those hoping to eke the best return from their cash reserves, online CDs could be a great choice. To make the savings die-hards happy, I did some research on current CD rates from popular online banks. Here’s what I found.
I didn’t know much about CDs until I won a $1,000 certificate of deposit, but its six month term is due to expire. It’s time for me to decide where I should put that money next. CD rates at ING have fallen since October; a 6-month CD would now only yield 1.25%!
| Ally Bank CD Rates | ||
|---|---|---|
| Term | APY | Minimum |
| 3 months | 0.95% | none |
| 6 months | 1.30% | none |
| 9 months | 1.20% | none |
| 12 months | 1.69% | none |
| 18 months | 1.74% | none |
| 24 months | 2.10% | none |
| 36 months | 2.49% | none |
| 48 months | 2.74% | none |
| 60 months | 3.15% | none |
|
Savings account: 1.49%
|
||
I don’t know much about Everbank. I do know that their rates are competitive, however:
| Everbank CD Rates | ||
|---|---|---|
| Term | APY | Minimum |
| 3 months | 1.00% | $1500 |
| 6 or 9 months | 1.24% | $1500 |
| 12 or 18 months | 1.64% | $1500 |
| 24 months | 2.03% | $1500 |
| 30, 36, or 48 months | 2.23% | $1500 |
| 60 months | 2.96% | $1500 |
|
Savings account: 2.25% (3 month bonus rate)
|
||
| ING Direct CD Rates | ||
|---|---|---|
| Term | APY | Minimum |
| 6 and 9 months | 1.25% | $0 |
| 12 months | 1.75% | $0 |
| 18, 24, 30, or 36 months | 1.50% | $0 |
| 48 or 60 months | 1.75% | $0 |
|
Savings account: 1.30%
|
||
| HSBC Advance (formerly HSBC Direct) CD Rates | ||
|---|---|---|
| Term | APY | Minimum |
| 6 months | 0.50% | $1,000 |
| 9 months | 0.75% | $1,000 |
| 12 months | 1.25% | $1,000 |
| 18 months | 1.01% | $1,000 |
| 24, 30 months | 1.10% | $1,000 |
| 36 months | 1.60% | $1,000 |
| 48 months | 2.00% | $1,000 |
|
Savings account: 1.35%
|
||
The shorter term CD rates at E-Trade are all lower than the interest offered by its savings account, so I’m not sure why anyone would feel compelled to sign up:
| E-Trade CD Rates | ||
|---|---|---|
| Term | APY | Minimum |
| 3 months | 0.01% | $1,000 |
| 6 months | 0.05% | $1,000 |
| 12 months | 0.20% | $1,000 |
| 15, 18 or 24 months | 0.40% | $1,000 |
| 30 months | 0.50% | $1,000 |
| 36 months | 0.60% | $1,000 |
| 48 months | 1.00% | $1,000 |
| 60 months | 1.10% | $1,000 |
|
Savings account: 0.50%
|
||
The last online bank I checked was Capital One. Its CD rates are fine, but to open a certificate of deposit, you need a minimum deposit of $5,000.
| Capital One CD Rates | ||
|---|---|---|
| Term | APY | Minimum |
| 6 months | 0.25% | $5,000 |
| 12 months | 0.50% | $5,000 |
| 18 months | 0.91% | $5,000 |
| 24 months | 2.00% | $5,000 |
| 30 months | 0.75% | $5,000 |
| 36 months | 1.90% | $5,000 |
| 48 months | 3.00% | $5,000 |
| 60, 84, or 120 months | 3.25% | $5,000 |
|
Savings account: 1.60%
|
||
I found CDs through a few other online banks, but either their yields were much lower, or I couldn’t access a full list of CD rates. (Some banks just put a teaser out front, and you have to sign up to see the full list of rates.)
One question I have — and maybe I’m missing something here — is why would anybody open a CD at HSBC Direct, for example, when their high-interest savings account yields more? And though savings rates might drop a little lower, they’re likely to increase long-term, right? So, why would I want to lock myself into a low CD rate when I expect savings accounts to go up by the end of the year?
Can anyone explain this to me?
As I say, I’m new to online certificates of deposit. Are there things I’m not considering? Should I be looking for factors other than the best CD rates? (I’m tempted to just remain with ING Direct — or to move money over to my credit union.) Have you held certificates of deposit at any of these banks? Are there other banks that should be considered?
This article is about CD Rates, Choices, Odds and Ends
March 2nd, 2009 at 5:10 am
My opinion is that with these rates being so low I don’t see why some people bother with CD’s right now. Many people here have mentioned that Creit Unions offer great rates on checking accounts. Mine gives 5% on balances up to $15k. I just need to have direct deposit, log-in to my account 4x a month, and use a debit card 10x a month.
People should really check into their Credit Unions first. Utilize them to the limit for the great rates (if available) then look to CD’s after that.
March 2nd, 2009 at 5:22 am
I think my money will get more interest under a mattress.
March 2nd, 2009 at 5:30 am
J.D. You also need to look at the coupon rate. The way I understand it(and I would gladly be corrected if I’m wrong) is if a CD has a coupon rate of, say, 2.00% and its coupon rate is, say, Monthly, then that 2.00% interest would be reinvested monthly. Some have annual, or semi-annual coupon rates, which would decrease the amount of money your money would make for you versus a monthly coupon rate.
March 2nd, 2009 at 5:41 am
Check out EverBank’s WorldCurrency CD’s which pay between 5%-10% APY for short term CD’s in other currencies. It is an American, FDIC insured bank, but you can put your money in something other than US dollar. Great alternative if you worry about having all of your money tied up in one currency.
Very soon I’m going to open up new CD in Indian Rupees which pays 5.25% APY for 3-month CD.
March 2nd, 2009 at 5:46 am
Hi, J.D.: Love your blog…always learning from it! I just recently set up savings accounts at http://www.smartypig.com. It’s just an easy way to keep track of your savings goals, keeps your money ‘liguid’, and its current APY is 3.75% (or 3.5, can’t recall just now). Apparently, this is not just an ‘online’ bank. They actually do have a ‘brick and mortar’ site, as well. Go now and check it out. Have any other readers saved with smartypig.com? I can’t remember where I spotted this site…I do believe a GRS reader brought it up in a comment to one of J.D.’s posts. Well, THANK YOU!
March 2nd, 2009 at 5:46 am
Call Bank of America….I called them two days ago and they gave me 2.5% risk free CD for 9 months.
March 2nd, 2009 at 5:48 am
@ Frugal Bachelor
From EverBank’s WorldCurrency CD disclaimer:
” it’s important to understand that your deposit will be susceptible to losses or gains due to currency-price fluctuations.”
Be warned that the great interest rate on these CDs might be offset (or more) by a decline in the value of that currency against the dollar.
March 2nd, 2009 at 5:59 am
I would look at local credit unions. Mine seems proud to have a rewards checking account that beats all but two CDs on your list… which are also local.
March 2nd, 2009 at 6:26 am
If you think savings rates are headed even lower in the coming months/year you might lock in a CD at a lower interest rate than straight savings. But I wouldn’t open up a long term CD at a lower rate, you notice HSBC only goes to 24 months.
March 2nd, 2009 at 6:35 am
The only reason I can think of as to why people would choose the lower rate in the cd is because it’s guaranteed over that term, whereas in the savings account they could lower that rate at the discretion of the bank - you’re not locking anything in by depositing money with them.
March 2nd, 2009 at 6:37 am
JD, you question why anyone would put money in a HSBCDirect CD — I question why you still have any money at ING….the only way to keep banks even remotely competitive is for money to move from banks lowering their rates to banks keeping them (relatively) higher
ING will remain fat and happy and continue lowering rates if it knows it will keep its depositors no matter how low it goes. Time to move, buddy.
Running this well-read blog puts you in a leadership position. So Lead.
March 2nd, 2009 at 6:44 am
@TJ (#11)
I was actually thinking about this yesterday. I know why I keep my money at ING — I like the interface, I like the multiple accounts, and the interest rate is, well, okay. But while looking up these CD rates, I was asking myself why I didn’t at least try to open accounts at the various other banks to see what they were like.
I have a lot on my plate right now, but I think that in the next couple of months, I’ll try moving $1,000 from ING to another account, just to see what the process is like, and just to explore the different user interfaces. This might not happen until May, though.
Thanks for the prompting.
March 2nd, 2009 at 7:00 am
I have noticed that even with some great rates found online, I have been able to negotiate another 1/2% bonus when at a bank and setting up my CD. I guess its a sign of the times and the desperation of the banks who need the money but I have so far been lucky to get some rates that are better than what is posted online. Try it next time you are considering getting a CD!
March 2nd, 2009 at 7:01 am
Sorry, everyone…I was mistaken in my previous comment: http://www.smartypig.com is offering 3.25% APY savings (not 3.5%).
J.D.-I think the idea of having your cash ‘tied up’ for an extended period is what keeps many of us from not investing in cd’s. Also, I know that some unscrupulous lenders give you a very short window (few days) to withdraw the money when the term expires. They don’t even notify you that the cd has matured! Then, when you aren’t paying attention, the bank just re-invests for another year (or whatever your term) and sometimes at a rate that’s NOT in any way competitive w/the going market’s rate!
March 2nd, 2009 at 7:10 am
Trent,
You might want to look at Charles Schwab for CDs as well. They use what seems to be a CD brokerage which makes it so that if you have to take out your CD prematurely, you may not be penalized.
I too am saddened by the amount I’m getting my money to work for me. Not going to rate chase though for 0.25%
March 2nd, 2009 at 7:14 am
It sucks to hoard cash these days. It’s getting harder and harder to find decent interest rates. Although rates are low, it still won’t discourage me from saving!!
March 2nd, 2009 at 7:18 am
TJ is largely incorrect about the flow of money from one institution to another. It’s not going to have any meaningful bearing on relative interest rates, even if customers do it in large numbers. CDs are default risk-free and they’re usually backed by short-term US treasuries, so when the Fed lowers the interest rate, rates on CDs (and anything else backed by Treasuries) will fall, too.
The question you have to ask yourself is whether or not moving from one bank to another is worth a quarter point gain in interest. Is the extra hassle really worth the effort of opening a new account at a new firm? For a dollar or two a month more, probably not.
Your time would be better used elsewhere.
March 2nd, 2009 at 7:49 am
Please advise: won’t his 3.5% ING cd rollover to 3.5% ? Thanks.
March 2nd, 2009 at 8:02 am
Rian is largely incorrect about basic supply and demand. If customers settle for a lower interest rate, banks will happily lower the rate. As with any purchase, savings account customers vote with their dollars.
Katy: when a CD auto-renews, the renewed CD keeps the same term as it did on it’s previous run, but in the meantime, the bank may (and probably will) change the rate paid for a CD with this term. In this market, its almost certain that renewal rate will be lower, perhaps MUCH lower
March 2nd, 2009 at 8:04 am
I agree with you, JD. I understand that CDs are a guaranteed interest rate, and with the massive downturn in interest rates lately it could possibly shelter some rate losses, but I know the rates will swing back up when we get through this and then those CDs will be *losing* money.
Now, I haven’t read all of the fine print, but from what I understand (and please, correct me if I’m wrong), a lot of CDs just have an interest penalty if you crack them early. I suppose if the rates swung pretty far northward it would be worth it to crack a CD early, lose a few months interest, and reinvest it in a better rate CD. (Of course, it would have to be a pretty big interest rate difference, YMMV).
March 2nd, 2009 at 8:12 am
@katy, old CDs roll over to the new rate–you don’t get to keep the old rate.
@JD, I agree that one might buy a CD at a lower rate than a savings account because it’s guaranteed not to go down. Even though you “expect savings accounts to go up by the end of the year,” will they have gone up enough to make up for all the plummeting between then and now? If you buy a CD for 9 months, your money will be available again at the end of the year to roll over into a higher-paying account.
I suspect there’s also a possibility that banks have low CD rates because they really don’t want to offer CDs or because they think they don’t have to compete anymore (but I would have thought banks would want more cash right about now).
My only advice on CDs is to double-check the “substantial penalty for early withdrawal.” At my credit union, that penalty is only 3 months interest or, if lower, total interest earned for CDs of one year or less and 6 months/total for those over one year. I used to get CDs when I really didn’t know if I’d need my money because even with the penalty, the rates were so much higher that chances were that I’d make more. Now rates are barely higher (or not higher at all), so for money I might use in the future, it’s not worth the risk to me.
Also, if you do end up paying the penalty, you can get a deduction on your US income taxes if you use form 1040. Wacky, eh?
I’ve never bought CDs in foreign currencies, but I do know that high interest rates are correlated with high inflation rates, which means, for example, even if you’ve got way more Icelandic kronas after a year, they might be worth so many fewer dollars that you’ve still lost money.
March 2nd, 2009 at 8:18 am
@Amber:
Depends. Bank of America’s “no risk” CD has no penalties after the first week or so.
@Brian:
The other side of Everbank’s warning - rates could be drastically better if the US$ drops. And most of their foreign currency CDs are places that have a decent chance of going up against the dollar - strong growth or commodity countries. Just do your research, and understand the risk/reward you’re looking at.
And a question for everyone to think about: since banks like to make money, why would they offer higher interest rates on savings? The only answer I can come up with is that they expect rates to go even lower, so don’t want to fix in higher rates. Of course, if that were true then their long-term rates should be lower than the short-term…
This is an important point: what are ‘the professionals’ doing? Offering worse rates if you set rates for 3 months to 2 years, and better if you don’t tie (savings) or go three years or longer. Always assume the other side of a deal knows more than you do!
March 2nd, 2009 at 8:28 am
Hard to belive that less than 2 years ago I got a 12-month ING Direct CD with 5.25% APY!
March 2nd, 2009 at 8:36 am
A person would open a CD right now based on their risk profile. If one is afraid of savings rates falling, they might be better off locking in at a fixed rate that, though might be lower now, won’t fall further in the near future. It’s all about risk and reward.
March 2nd, 2009 at 8:36 am
Does anyone know if the international CDs mentioned here are FDIC-insured?
We have almost all of our emergency account in CDs. They are tied up, and I view that as a good thing…not so easy to turn them into spendable cash. It’s worked for us for 15 years, and we’ve (fortunately) never had to use them. But we know that they are sitting there. We go for the “specials” offered by our bank, but as mentioned before, you need to make sure that you mark on your calendar the day it comes due…then you need to roll it over to the most current special, or the best rate fro your time frame.
Also, another point to consider when opening a local bank/CU account: If you have young children who you intend on teaching them money skills, it’s better for them to take their $5 or $2 and give it to a teller, and the teller gives hem a receipt for their money. My girls have a special bank envelope that they put money in at allowance time, or after they do a special chore or babysitting. Every month or 2, we make a trip to the bank, and they have their amount,they fill out the deposit slip, and hand it to a teller, and they get their receipt back with the current balance on it. They also realize that savings is just something we do. My 10 year old has been doing this for years, and it’s almost as if she forgets that she has the money…it’s always a surprise to her when we go to the bank and she realizes that she has nearly $600 saved from her nickels and dimes…hopefully a lesson she’ll have her whole life. When my 14 year old had saved enough to open a CD last year, we looked at the rates, and she was able to lock in a 4.5% 2 year CD. When the CD comes due, she’ll be able to connect the fluctuating interest rates from her first CD to rolling it over and (unfortunately)probably find rates lower at that time. How do children learn this with ING or other online banks?
March 2nd, 2009 at 8:39 am
In January I intended to open a CD at DollarSavingsDirect at their then advertised 4.0% rate. I didn’t realize it at the time, but they require you open a savings account first, THEN you can open a CD. By the time my account got approved and my funds were transferred (it took over 2-weeks, and I though HSBC was slow) the CD rate dropped a full point to 3.0%. I hate their antiquated interface and super-slow transfers, so even though their CD is still 3.0%, I’m going to move my money elsewhere. Its a good point that, while previously opening a CD meant you were locking in a high rate as savings rates fell, at this time opening a CD puts one at risk of being stuck with a low rate as savings rates should be increasing over time in the near future.
March 2nd, 2009 at 8:47 am
For good reasons, most people focus on the interest rates, but I would suggest that people also focus on ING’s lack of a minimum investment.
Unless you have a lot of money to put into CDs, the high requirements at most banks makes laddering CDs very hard (JD has a good post about laddering CDs, and ING has a great laddering tool). This makes your money more vulernable to bad timing. By this I mean that a significant percentage of your money could come due for renewal during low rates.
By not having a minimum, even an investor with a small amount of total money to invest can ladder CDs.
Even if you don’t ladder, the lack of minimums can work in your favor. You make just as much money from 10 CDs for $100 than you do from 1 CD for $1,000. However, if you need $200 in the former case, you can close 2 CDs early, and take the hit, while still earning the rate on the other $800. In the case of one big CD, all you can do is close the entire CD.
The very same investors who would benefit from low minimums this way are the ones who don’t see much of a gain from getting .5% more interest.
Like most investment issues, I am not saying that the choice is clear, but you have to take in all the variables, not just interest rates.
March 2nd, 2009 at 8:49 am
I recently needed to roll over a maturing 12-month CD from ING, and like many others are discovering, ING’s current yields are pretty disappointing. After doing a bit of digging, I found that all of the local credit unions (and some of the smaller-ish local banks) were yielding much higher returns, around 50 to 100 basis points higher than online institutions. I ended up rolling it over to another 12-month at 3.60% APY at the local credit union.
CDs are like mini loans for the bank, who turns around and lends the money out for commercial and consumer loans (e.g. borrows at 2% and lends at 6%). Research shows that CD rates are not terribly competitive to begin with because consumers value non-cash features about as much as the rate, like convenience and customer service. Banks are also reluctant to outbid other banks to lock in the (CD) rate on their “loans”, especially when they know they’re just getting “hot money”.
I think a lot of the online banks’ lending businesses are in the toilet. Low future lending means low future borrowing, which in turn means low CD rates today. For commercial banks, fewer businesses applying or qualifying for loans also means a lower need to borrow. However, I think local credit unions are offering attractive rates to either A) bulk up their deposits, or B) they foresee a lot of consumer lending in the near future.
References:
- Evidence of early withdrawal in time deposit portfolios - Journal of Financial Services Research (1999)
- Lower your cost of funds - America’s Community Banker (1999)
- Deposit magic - Credit Union Magazine (2008)
March 2nd, 2009 at 8:50 am
At a good-sized regional bank at which I used to work, most of the CD rates were generally not competetive, but there were often “specials” on odd-numbered terms such as 7-month, 13-month, etc. which were always well above other similar terms. (Example: 6- and 8-month CDs were at 0.65%, while 7-month CDs were at 2.25%.) Because they were odd rates, they never showed up on rate comparison surveys (which genereally only list 3, 6, 12, 24 month, etc.). Moral: always ask your bank/credit union if they have any specials!
March 2nd, 2009 at 8:54 am
CD - Certificate of Deposit.
It is a Certificate that says you have a Deposit.
This is not a sophisticated financial investment. It’s a savings account with a piece of paper that means you have to pay fees or penalties if you withdraw early.
High yield savings accounts and money market accounts are much better locations for short term money-parking purposes such as saving lump sums to make purchases or for lower risk accounts for your emergency fund.
March 2nd, 2009 at 9:09 am
Thanks TJ!
March 2nd, 2009 at 9:15 am
@cmadler: Offering odd-month CDs is another technique employed by banks and credit unions to attract deposits and keep them from “flying out” at maturity. If one is laddering, it’s difficult to swap out 13-month CDs, especially if it’s a one-time deal.
As I’ve been thinking about it, when my next CD matures this month, I might do the same thing smart car buyers do: Call several of the local banks and ask “What’s your best 12-month CD rate?” It should be an interesting experiment.
March 2nd, 2009 at 9:24 am
Man… Suddenly my 1.75% Risk Free CD at BoA doesn’t look so bad! No withdrawal penalty with 1-week notice.
March 2nd, 2009 at 9:51 am
Anyone use EmigrantDirect.com?
I was surpised they were not mentioned.
3.0% 5-10 year CD
2.05 Savings.
Very quick turn around for withdrawals.
March 2nd, 2009 at 9:59 am
I remember reading an article somewhere (and I wish I could remember now what it was) that said if a particular bank is offering an interest rate that is much higher than what is being offered by other banks, the bank offering the higher than average rate should be avoided as they are in desperate need of cash. This was happening just before Indy Mac went under. They were offering rates that were often 3-5% higher than the industry average.
If a majority of banks are offering rates from 1 - 3.5% and you find one that is offering 5% and up, please do your research first.
March 2nd, 2009 at 10:02 am
In addition to the previously mention, that the rate can change at a whim, I think, if you check the fine print on the “deposit account” agreement, the can make you wait for your money, make you jump through hoops, and can limit your rights on where you can sue about it. With CD’s, FDIC insurance has rules around what they can do. (And the regulators take a very dim view of ANY complaints. Not like they want to do any work, better that those they supposed “regulate” make everyone very quiet.)
March 2nd, 2009 at 10:09 am
@Limber (#34)
I didn’t include Emigrant Direct (or its sibling, Dollar Savings Direct) in my list because there’s no way to find its CD rates. It lists a 3.00% rate for its five year CDs, but what about other terms? The site is opaque, and that makes me wary. All of these other sites offer tables with CD rates at various terms…
March 2nd, 2009 at 11:05 am
The link provided to the FNBO Direct CD rates shows the disclaimer that “We may accelerate the maturity or call this account at our option on any maturity upon 30 days written notice.” This means that if you close the CD early, you have to pay a penalty, but the bank can choose to close the CD early with no consequence whatsoever. This is a bad bargain for the depositor because it benefits the bank at the expense of the depositor in both rising and declining interest rate environments.
March 2nd, 2009 at 11:39 am
Yes, it surprises me too when a bank has lower interest on CDs than on its savings account (E*Trade as the example).
I do think a previous poster has it right, they dont want to be bothered; I guess they feel they must have them listed to be seen as in the market. Benign neglect it sounds like.
March 2nd, 2009 at 11:58 am
There’s a lot of talk on both sides of the inflation/deflation coin. So much is up in the air right now…when the credit markets unfreeze, we could be stagnating and deflating, or rapidly inflating.
Since there’s deflationary pressure almost anywhere, don’t worry about rate of return, deflation is giving you a percent or so already. Think about liquidity. If the dollar devalues later this year, you could see interest rates spike, and a 36 month 3% yield won’t look so great.
Too much volatility right now to lock up funds long term, IMO.
March 2nd, 2009 at 11:59 am
This feels a bit like reinventing the wheel, when Bank Deals blog provides a much more comprehensive weekly list.
March 2nd, 2009 at 12:10 pm
@JD
If you are interested in CD?, there is a great website for having banks bid for your money. Give it a look. It will even help you setup a CD ladder (even one with multiple banks and multiple at the same maturity dates).
http://www.moneyaisle.com/Default.aspx
Let me know what you think.
March 2nd, 2009 at 1:19 pm
See also: Pentagon Federal Credit Union (www.penfed.org)
Competitive rates on everything including savings, CDs, and loans. Anyone can become a member. If you read the fine print, you’ll find the loophole.
March 2nd, 2009 at 1:37 pm
I haven’t read all comments, so not sure if anyone’s mentioned this yet. Try Self-Help Credit Union’s CDs. SHCU is a fantastic organization. http://www.self-help.org
Term Certificates (CDs)
($500 minimum)
3-month term 1.27 1.28
6-month term 1.80 1.82
12-month term 2.50 2.53
24-month term 2.75 2.79
36-month term 3.00 3.05
48-month term 3.00 3.05
60-month term 3.25 3.30
March 2nd, 2009 at 2:01 pm
iGobanking has decent rates as well.
2.0% APY savings; CDs are 1.25% to 3.25% APY, although the 6-month CD is 1.75% APY compared to the 1.25% APY for the 8-month commitment.
http://www.igobanking.com/home/cd_rates
They have no fees, no minimums, easy online transfers. I don’t have any complaints, although it may not be the best option for non-web-savvy individuals.
March 2nd, 2009 at 2:02 pm
I was asking the same questions about two weeks ago, IIRC, ING was offering 2% on a CD but 2.15% in savings. I decided that my CD ladder was a form of dollar-cost averaging, I still had the rest of my CDs at more than 3% so having one at the lower rate was OK. So I bought the CD at 2%, then a week later, the savings rate dropped to 1.85%. So I locked in a bit more on the hedge.
March 2nd, 2009 at 2:48 pm
@JD One reason for locking in a cd at a lower interest rate then a savings account that hasn’t been mentioned is the psychological factor. It is more difficult to surrender a cd for its cash value than it is to empty a savings account. This helps people who have a tendency to spend everything in their accounts to force savings as the money is now tied up for several months/years at a time.
March 2nd, 2009 at 2:54 pm
One reason a person might open a CD instead of a high-interest checking account is if it’s for an IRA. IRAs can’t apply to checking accounts. I inherited an IRA CD from my mother at Chase Bank, and the CD just expired. The new rate is .20%! (Yes, not 2%, .20%.) The trouble is that I can’t find a bank that will take an inherited IRA, since they’re confusing to administer. It looks as if my local credit union might start taking them, which would save my bacon. Another option would be to put the money in a stock-market IRA, but this is the “cash” part of my investments, and boy howdy have I been glad of its guaranteed return as the stock market has plummeted recently. Anyway, if I could find an IRA CD that paid anything like a decent rate, I’d put the money there, since a checking account is not an option. So that’s one answer to the question of “Why a CD?”
March 2nd, 2009 at 3:11 pm
Right now at Navy Federal Credit Union
6 month CD $2500 min 3.0% apy
6 month CD $10k min 3.25% apy
30 month CD $15k min 4.6% apy
And also:
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New Savers Special Certificate With 3.75% APY* for one year, need to do a direct deposit of $25/minimum
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March 2nd, 2009 at 4:33 pm
@48: MB:
Yes, rates are simply miserable in some places. Wells Fargo is just as bad.
It would be worth your while to check around for better rates on IRAs. Check some of the brokerage houses as well.
March 2nd, 2009 at 4:46 pm
GMAC Bank…they’re rates are high for their savings accounts.
Anybody familiar with them? Are they reputable? I am thinking of transferring some funds from my ING Direct account to GMAC Bank in the Salt Lake City area.
Thanks for your input!
March 2nd, 2009 at 5:28 pm
You know — they are playing a psychological game with us right now — they are hoping we’ll see it’s futile to save so we won’t bother. RESIST!!
I think that it is wrong to look at savings vs. CD interest rates and choose one based on the interest rate. The real criteria is what you want to accomplish?
–Do you want immediate, ready access to your cash? Go with a savings or checking account.
–Do you want safety for your principle, and don’t want it to be too easy to access (or is it a retirement account)? Go with CDs.
Unless you have high balances (like, the $100K variety, the real difference between 0.75 and 0.5% interest, or 1.25 and 2% interest — is negligible enough that it really doesn’t matter.
The real choice is — given that a savings account is right for a given pool of money, where can I get the best interest rate on savings accounts?
Or, ditto for CDs.
Not for one vs. the other. If you’ve got $1,000 or $5,000 in the bank, it’s really not going to matter that much to chase a .25% difference in interest.
March 2nd, 2009 at 5:33 pm
Oh — P.S. –
Given current crappy interest rates, if you go for a CD it probably makes more sense to go with a shorter time frame. I’d rather gamble that interest rates will go higher, than that they’ll go lower.
I have a CD that will be maturing in August, that’s been hanging out there with it’s lovely 5% interest rate for the past 48 months. I’m planning to roll it over, but probably for no longer than 6 months. Interest rates are too appalling right now to lock it up longer.
March 2nd, 2009 at 5:43 pm
While I wish that my credit union was even half as competitive as yours, J.D., it’s still beating all of the other banks in my area and the online banks, as well. It cannot be repeated enough–check out your local credit union!
March 2nd, 2009 at 5:45 pm
I am a Branch Manager for a large southeastern bank. That said, here’s how banks come up with their CD rates (in a nutshell).
CD rates vary according to the deposit needs of a particular bank at a given point in time. When a bank needs money for a purpose (fund loans and/or improve capital ratios to rely less on borrowed money for example), and determines the length of time it needs it for, the bank will offer a higher rate for that particular period. What you will find is that most fo the time, banks offer “Special” rates for odd terms (8, 9, 13, 25 months) rather than the standard (3, 6, 12, 24 months). If you check those terms, chances are that rates a very low. Once a bank reaches its target, it gets rid of the “Special” rates or may adjust rates downward.
Also, there is something to be said about high rates offered by banks. If the bank is desperate for deposits, it will offer higher rates. A lot of times though, they are offering these rates at the risk of losing money since spreads (difference between amount paid for the funds and the cost of funds) are very thin and change daily.
A prime example of this was the now defunct WaMu. Just before their collapse-and subsequent purchase by JPMorganChase, WaMu was offering outrageously high short term CD rates online. At that point, they desperately needed the deposits to make up for the ones they were losing on the back end. Ultimately, that strategy failed and the FDIC came knocking.
March 2nd, 2009 at 6:14 pm
Not worth it. Just get the Smartypig 3.25% savings account.
March 2nd, 2009 at 6:16 pm
@Rob:
Very interesting. So what should we infer with today’s obscenely low rates?
If there is really a liquidity crunch, wouldn’t they want to stimulate deposits into the bank? I admit I barely understand what is going on right now.
Ohhh….though they wouldn’t really want our deposits right now, right? Not if they can’t actually meet the terms. Hence the low, low interest rate. They are basically telling us they can’t give us anything in return for holding our money right now.
Am I right?
March 2nd, 2009 at 6:57 pm
if you want to do good in the world with your money AND make a nice return, look into http://www.microplace.com
This is a cutting edge way to loan money to microfinance clients - the world’s poorest, hardworking entrepreneurs for whom borrowing money at fair rates can help them provide a secure future for themselves and their families - mostly they’re women.
Microplace is currently offering 5%. Pretty good, considering how well your money will be used before you get it back!
March 2nd, 2009 at 7:05 pm
I’m shopping for a new CD now for 60 months. The one I have that’s maturing is with EverBank, and I’ll probably just leave it there and take the 3.25%. If rates rise dramatically it may be worth taking the penalty, but in the mean time it’s better than a typical high interest savings or money market account.
March 2nd, 2009 at 8:25 pm
There is a difference between the HSBC rates: http://www.us.hsbc.com/1/2/3/personal/savings/deposit-rates
and HSBCDirect rates for the online CD: http://www.hsbcdirect.com/1/2/1/default/learn-more/ocd?code=CSM0000630&WT.ac=HBUS_CSM0000630
March 2nd, 2009 at 9:39 pm
Man, those are some really bad rates!
March 2nd, 2009 at 11:29 pm
Here’s a thought of why interest rates are so low. Banks can borrow from the Fed at 0% or even better, get bailed out by our socialist government.
March 3rd, 2009 at 3:17 am
Someone should note that CD rates are available at Bankrate.com — you don’t have to phone around.
March 3rd, 2009 at 8:20 am
@BPT, I agree. Microplace is a great investment in interest now and socially. My goal is to invest $100 per month for 10 years with them. Too bad the 5% isn’t available in my state, but 3% is nothing to sneeze at now. And Yes, after >6 months of investing the interest is paid and principle returned into the account the money was invested from.
March 3rd, 2009 at 8:49 am
@ bunkman
I have had a GMAC CD since September (4.25%), and after having reached the breaking point with HSBC’s customer service (they apparently didn’t want my 10k CD because I’m a grad student?) I am closing my HSBC savings and opening a GMAC savings account. I haven’t had to talk to GMAC’s customer service yet (which I count as a credit) so I don’t know how good it is, but GMAC is FDIC insured, so it should be good, plus they need the cash so their interest rates are pretty good.
March 3rd, 2009 at 9:08 am
Even though this is a riskier path, what about considering a stock such as HSBC Finance Corp (HTB)? They are paying an amazing dividend when compared to their stock price (approximately 12%).
March 3rd, 2009 at 9:37 am
Don’t freak out too much over the low interest rates. Inflation is also very low, so even though we were all earning 3% and higher before on savings accounts or CDs, the rate of inflation was also much higher. I agree with the other posters who are urging everyone to keep saving even though the gov’t is trying to get us to spend by lowering the prime rate.
March 3rd, 2009 at 10:09 am
Hey JD - I know you just did this yesterday, but you may want to update already. ING dropped rates effective today.
March 3rd, 2009 at 12:23 pm
I’m thinking of opening a high interest checking account. http://www.checkingfinder.com shows you rates near you and is recommended by Dave Ramsey, but for some reason I’m hesitating. What’s the catch? Why do some of these pay 4.25% when CDs and savings aren’t paying anywhere near that?
March 3rd, 2009 at 1:26 pm
Depending on the purpose of the money, the early withdrawal penalties can play a big role. I just moved my eFund into cds at my local CU. With a measly 6mo cd, I can beat ING’s rate, and there is no danger of losing my principle except if I withdraw within the first 7 days (which is required by law?regulation?something!) Worst case is simply losing my interest (up to 90/180 days). So if I don’t use it, I make a little money, if I do use it, I don’t have to worry about losing some of my money to penalties.
Generally, I’d lock in longer terms as soon as I see rates falling, and use shorter terms while the rates are rising. That way, you lock in the longer terms near the top, and you’re not locking in a lower interest rate at the bottom.
Right now, rates still seem to be falling, so I’d lock in what I can for about as long as I think things will keep falling. Admittedly, that’s just guessing, but that’s pretty much what picking a cd term comes down to. (Unless you have a time frame for needing the money.)
March 3rd, 2009 at 3:44 pm
That does it. Yesterday I opened a high-yield account with my credit union at 1.6% because I recently inherited money. It’s been 1.7% for the past year and went to 1.6% in February. ING is now at 1.65%. I’ve just now switched my emergency fund out of ING into the high-yield account. It guarantees rates for a month. By the end of the month, ING will probably be at 1.5% (or lower). I don’t think ING wants my money anymore.
BTW, last summer I switched from Chase to ING. I checked last week — Chase’s savings account interest rate is 0.01%. No, I’m not kidding.
March 4th, 2009 at 12:28 pm
While the Treasury rate is plummetting, and with it the APY of seemingly every form of savings account, the credit card companies are raising their rates. I’ve been paying steadily on my Capital One card and they’ve raised my already unimpressive 14.99% APR to a nearly usurious 17.99% (let’s not discuss the positively usurious default rate, hovering around 35%, as I recall) due to “economic pressures”. It’s action like this that clearly shows how the banks are shutting down credit, even for “customers” with a good payment record.
Fortunately, my debt snowball is just starting to roll over this account; I’ll have it paid off within the next month. I’m seriously considering closing the account, right now I’m still weighing it against potential impact on my credit score.
March 4th, 2009 at 12:43 pm
The rates are so low it doesn’t seem worth it to put money in one of these CD’s just in case you need the money.
March 4th, 2009 at 2:21 pm
Check out the Nationwide Bank (http://nationwidebank.com). They have pretty decent rates for local banks. Until about two years ago, they were a credit union that became a bank.
March 5th, 2009 at 12:00 pm
TJ,
Sorry that’s not how it works. I know how supply and demand works. I also know how CDs work, and I know why interest rates rise and fall the way they do, and that supply and demand aspects have very little to do with any of it. (Supply and demand may have a very small impact, like a quarter point or so, but not enough to shift a particular institution’s offerings by more than that.)
I suggest you read up on monetary policy, asset markets, and finance. Mostly monetary policy, though.
March 5th, 2009 at 12:20 pm
If you go to http://www.hsbcdirect.com , it’s showing a 12 month cd at 2.5% and a 18 month at 2.75%. Of course, online only, but still decent.
March 13th, 2009 at 5:21 am
In late Jan I opened a 12 month cd at 3.5% and then in Feb I opened a 6 month cd for 4% at Navy Federal Credit Union. Last week these rates were still good (I have not checked since then). I invested $2500 in each but the 12 month cd had a minimum of $100.00 (if I remember correctly)and a contribution was required each month.
March 21st, 2009 at 12:32 pm
I figured the reason to put your money into a low-interest CD is the fear that interest rates are going to continue going down. A 1.5% CD seems pretty good, if you’re worried that rates will go down to 0.8% (as my money market fund fund is currently yielding). Of course, given that the prime rate is currently at just above zero, I don’t know how much lower people actually expect it to go…
Personally, I’m going to cash out my ING CD when it matures this month and transfer it over to SmartyPig (which, as others have mentioned, is one of the higher yielding bank accounts out there, and was yielding more than ING’s CDs even last year, before the precipitous drop in saving account interest rates).
March 31st, 2009 at 4:43 pm
I second Holly’s suggestion about SmartyPig. It is somewhat of a pain to work with for general savings because of the need to specify a specific goal, but the rate is still 3.25% so it’s hard to beat.
April 1st, 2009 at 2:44 am
BEWARE HSBC ONLINE CD’s !!!!!Hsbc has an online form that you use to sign up for a choice of CD’s. You check off the length and the rate as part of the form. The funds I used were from an existing online account through them. Just to make sure the rate was secure even though the form listed it I call twice with various questions and was assured that the rate was what I checked off on the form. The next day I checked and they had given me a lower rate and could really care less. Two weaks later and three long phone conversation with a few people half way around the world and still no call back. What a joke and very decieving. My account is pretty darn big too. Cant believe it!!!!!!! Dont get involve. Even my online savings had some issues.
May 23rd, 2009 at 11:52 am
GMAC is now Ally Bank (www.ally.com), and their CD and savings account rates are better than what’s currently listed on this page.
July 23rd, 2009 at 5:48 pm
Another good place to check for rates is AAA (www.aaa.com/deposits). I used several of their CDs to build a ladder, along with my credit union and another bank. If you’re going to use a ladder for a combination of short-term liquidity and better savings rates it might give you what you need… and if you’re a AAA member it’s a great way to get more out of your membership.
August 1st, 2009 at 2:32 pm
a lot of these “ONLINE” only banks I have never heard of. how do I know that they are really legitimate banks and I am not sending my money to a scam? these days anyone can put together a website and put up a sign that says the CDs are FDIC insured. Is there a way for me to verify that an online bank is really a governement registered bank? thanks.
August 12th, 2009 at 9:41 pm
It is available for moneyrates.com only or cd rate is the same for all cd online?
August 16th, 2009 at 11:52 am
If a six-month CD has a rate of 1.5 and a one-year CD has a rate of 2.0, why wouldn’t it make more sense to have a six-month that rolls over instead of a one-year? Even if the rate drops to 1.0 in the second six-months isn’t that still more than you’d earn in the one-year CD?
November 11th, 2009 at 2:26 am
Hi! I heard that as of Nov.2009 , that US savings bonds were paying 3 . something % , which ios better than the banks.
November 16th, 2009 at 1:52 pm
Be careful about letting CD laps and not renew or transfer. Case and point. We had a great 5% rate at WAMU for 13 months. CD ended in September and got renewed at 0.20%. YES, that low for another 13 months. To break the CD terms we lose $25 plus 3% of money. So, we’d have to make 4% in order to earn the money back we lose by breaking the CD (CD is at CHASE). If you have ability, I highly recommend not allowing “auto renew.”
February 22nd, 2010 at 11:11 am
Just a word regarding previous commentor’s post on the Schwab cd’s. While it is true that you will not be penalized for withdrawing funds prioe to maturity…BEWARE, if you do opt to sell prior to maturity, the brokerage will sell the cd at “market value”. If you’re real close to maturity, you’ll probably make out by getting principle plus most of your accrued interet, BUT if interest rates go up from what you’ve locked in, you CAN lose some of your principle (albeit a small sum).