The Federal Reserve announced today a lowering of the interest rates 50 basis points from 1.75% to 1.25%. Presumably this will precipitate a nice drop in rates on high yield savings accounts.
Could make sense to lock into a CD or a No-Penalty-CD now to avoid the rate decrease. There also might be a few options (like Elements Financial and Patriot Bank) who have guaranteed rates for a certain amount of time. Lock funds in now before they decrease.
For those unfamiliar, a no-penalty-CD is as good as an ordinary high-yield savings account, the only downside being that when you break it you have to break it entirely. Ally Bank offers a 1.90% no-penalty CD with a $25,000 minimum. You can open multiple no-penalty CD’s, and a lot of people like opening multiple CDs with $25,000 in each. That gets you the highest rate possible on a no-penalty CD, but still gives you flexibility of breaking each $25k without affecting the others. A similar thing might (?) work with Goldman/Marcus who offers a slightly higher rate of 2.00% on their no-penalty CD.
Does anyone know anything about the 8 year CD @ 3.00% that Ron Howard mentions in his post?
I do bank churning, do CDs count towards chexsystems?
Fidelity notice of negative interest rates: Due to the recent drop in interest rates, some Treasury Inflation-Protected Securities (TIPS) now have negative market yields. While active markets do exist for TIPS, pricing for these securities is not currently available on Fidelity.com. If you are interested in buying or selling TIPS and cannot locate an active market on Fidelity.com, please contact a Fixed Income Specialist at 800-544-5372.
Could someone explain why people prefer CD’s here? I get having access to cash, but beyond a certain point why not just invest? I can buy (relatively) safe muni, Treasury and bond ETF’s that yield way more than CD’s do. Just curious
Its simplier for most people who are not keen on investing and guaranteed rate assuming it doesn’t go down. Think about why a lot of people don’t invest their money in general because there is a lot to learn and people don’t know how to select the MF/ETFs.
Because if you have an emergency fund, a CD ladder is a good way of ensuring you have accessible funds, that won’t lose value, accumulating interest.
Volatility is equities. Many are not cut out for it.
The part I don’t get is Gamers will argue Equities r a losing proposition….
Lol.
Treasury don’t yield way more…
Haha. Ten yr yield .99 percent. 8 yr cd yield 3per cent.
You want your money in cash if you are saving for a large purchase coming up soon.
CDs are NCUA insured, and their yield can be significantly higher than that of the comparable treasuries. I like treasury ETFs too for liquidity purposes, but most of my cash is in CDs. Muni funds can have a much higher yield, but that comes with much higher risks – several States/Cities are likely to default fairly soon, unless there will be a mammoth bailout. Medium to long-term, cash is gonna be trash but that is another story. Note, that you can also buy and trade CDs via an investment account (and they will FDIC insured), but again rates from credit unions can be more attractive than rates of bank CDs offered in investment accounts.
Agree, I don’t get it. I’d put the money in 3-4 high-dividend payers, and drip in every 1-2 weeks, dollar cost averaging is free now that commissions everywhere are $0. It’s a good time!
If you are locking into CD’s now you are about a year short. The time to lock CD’s was a year ago when the Fed started cutting rates. All of mine, my spouse’s and our joint accounts are maxed out and at 3.25 and 3.50%. The longest being 5 years (now 4). If you are doing it now you are a dollar short and a year late.
8 year cd available @ 3.00%. Worth looking into.
Ron Howard, who is offering the 8 year CD @ 3.00%?
Andrew’s FCU
Bob, thanks for the response…
The highest/longest non-IRA CD I’m seeing on their website is a 7 year CD @ 2.35%
Was the 8 year CD a special they only offered for a limited time?
I know DoC readers are smart. There’s money meant for CDs and there’s money invested in stocks. Nothing wrong pulling out some of that stock gains now and putting it into CDs while the rates and stocks go down for the next year or so.
Warren Buffet can’t time the market. No way DoC reader can.
@Darrell Even though the CD thing worked out for you for now, I am just not sure if I would have gone back and locked myself into 5 year CDs. Even at this point, I would just lock myself into 1 year CDs or No Penalty CDs.
Trump isn’t going to fundamentally change the economy. What we have is slow growth n low rates Forever…..lol.
The Era of Warren Buffet is over.
Gdp just went down…Mariah Carey is cancelling concerts.
Was partying last night. 5% on 15,000 for six months, I was the envy of the room. A mean lady pulled me aside and said she had 5,000,000 earning .005 per cent. It made me Cry. But I got her point…
..do U?
I was also Crowing about how obamaCare was the Bomb for poor people. She pulled me aside and asked why I’m still poor. Ten years n I got nothing to show for it.
Low premiums combined with high deductible s make it useless for Many.
She is really really mean…..
Does anyone know if all banks and CU are required to lower the interest rates when the federal reserve cuts them?
No.
They aren’t required to, but they can lose money if they don’t.
Don’t really understand rate chasers especially at rates this low. Just gimme a bank sign up bonus or two and I’ll make more in a year. And I tend to do more than 2 in a year anyway….
I have the same outlook but some people have more money than they can use for bonus churning. You really only need a few thousand a year to full-fill bank bonuses every year. If someone want to keep cash past what they churn liquid and not invest it long term a fixed income product like a CD can be a good option.
So does this mean lending rates will be lower for things like autoloans?
90,000 people cancelled convention in Hnl. Kuhiio McDonald’s no one but Me……lol.
This is gonna hurt n it’s only a Flu..
.lol.
This would be life under a Big 🐦 Presidency……lol.
Only the 1% will be able to enjoy Ronald McDonald’s.