What is the appeal of opening accounts at multiple places for these CD deals? I’m genuinely curious. I’ve always bought CDs from a discount broker at no charge. They’re available in terms from 3 months through 20 to 30 years. The rates are usually higher and only require $1000. When they mature, the proceeds are automatically deposited into your brokerage account. No grace period, no rollovers, nothing to keep track of.
I’m going to use Ally Bank in this illustration, because of the recent FW topic about their No Penalty CD.
Here are some rates as shown on Ally Bank’s site as of 9/29/17:
High-Yield CD - in terms from 3 months through 5 yrs. - 1.35%
Raise Your Rate CD - in terms of 2 yrs. or 4 yrs. - 1.50%
No Penalty CD - 11 months - 1.00%/<$5000, 1.25%/$5000-$24999, 1.50%/$25000+
Here are some available rates for new issue CDs at Fidelity:
The rate for Ally’s High-Yield CD do beat out Fidelity’s rates for the 3 mo. and 6 mo. terms. After that, no.
The Raise Your Rate CD is lower than Fidelity’s rates for the 2 yr. term. Ally’s 4 yr. term is lower than Fidelity’s rate for the 3 yr. term.
The No Penalty CD rate requires you to tie up $25000 to get 1.50%, which is the only rate that is higher than Fidelity’s rates for comparable terms (9 mos. or 1 yr.). At $5000 - $24999, Ally’s rate is higher for the 3 mo. term, but they lose the advantage after that. If you’ve got less than $5000, you’d be better off with Fidelity’s 3 mo. rate and it only goes up from there.
Schwab also has similar CD rates, actually slightly higher rates on the shorter end maturities.
I have all my investments (index funds) at Fidelity, which is my financial hub. But I’ve always had my CDs at Ally. I haven’t looked at Fidelity’s brokered CDs in years, and at the time they were lower than what I could get elsewhere. Do brokered CDs have the same FDIC protection?
I have most of my Ally $$ in 4 yr raise-your-rate CDs, because I have been foolishly hoping that rates would rise. I have a deep psychological resistance to locking in such relatively low rates (around 2%) for periods of 3 or more years. The last several batches of CD $$ have been placed in no-penalty 1.5%.
Also, Ally generally gives you a 0.05% loyalty bonus when you renew a CD. Renewals can be for different amounts and terms, i.e., you can renew a 4 yr RYR CD with more $$ into a 1.5% no penalty CD.
For short terms and ultimate liquidity, savings accts are looking better: PurePoint at 1.3% and Ally at 1.2%.
It’s pitiful that we have to hunt for a few basis points here and there with these ridiculously low interest rates.
It’s certainly short term. I opened 2 of these, one for me & one for spouse. But, only $10K each when I would like to see a 3% CD for a much larger balance.
Someone in the comments for the 1st United Credit Union 36-month CD said it’s got a 1-time bump up and you can add on funds at any time. . . and I’m not eligible
It’s been a terrible decade to be a saver, and the trend is set to continue. I would hate to lock up my money for years for a measly 2-3%, but such is the world we live in.
**** 10/11 Edit to add: The minimum deposit is $500, with a $10k balance cap, and there is a limit of one Member Appreciation Day (MAD) Certificate per member. There is also some talk that the member needs to have a checking account as well in order to get this certificate.
But just think of those record low margin rates for your stock investments! Wasn’t that what the Fed was telling us we should do with their super low rates? Go buy stocks or real estate with lots of cheap leverage… what could go wrong?