Add On CDs Question: Seems Too Good To Be True

NFCU offers addon CDs such that you buy a CD that has a 3 year maturity, yielding the commensurately higher rate for a longer maturity CD, and they allow you to add onto it with new money at any time.

It seems like a ladder could be created. Every 6 months you buy another 3 to 5 year CD. And as you get within 6 months maturity, you buy into it and get the 3 to 5 year rate, even though you’re only locking in that marginal money for 6 months.

Hypothetical examples here with made up numbers:

12 month CD rate = 2%
24 month CD rate = 2.5%
36 month CD rate = 3%
48 month CD rate = 3.5%

At time zero you buy the minimum amount ($1,000) to open a 48 month 3.5% CD. This is CD 1.
In 6 months you buy another 48 month CD at 3.5% at minimum amount ($1,000). This is CD 2.

Repeat until you have 8 different CDs, each maturity at 6 month intervals over the course of 4 years.

Whenever you have excess cash to stock away, you drop it into the 48-month CD that’s maturing soonest, which will always be 6 or less months. But you get the return of a higher risk, longer duration CD.

When your CD expires, you use the proceeds such that you put the minimum amount ($1,000) into a new 4 year CD and put any excess into the next CD in the ladder that’s expiring within 6 months.

You could do this every 3 months, assuming you have the money for the minimum CD amount to cover that. At $1,000 minimum per CD a 3-month laddering of 4 year CDs would be $12k. Easily doable for most savers that would even consider an advanced technique like this. Albeit more overhead in effort. 3 months seems reasonable so that might be the sweet spot for me.

Seems like free money on a risk-reward matrix. The biggest downside is that it takes a few years to get rolling.


This is an automatically-generated Wiki post for this new topic. Any member can edit this post and use it as a summary of the topic’s highlights.

the problem,even though you figured out a great system is the CU can change the rates or do away with these cd at their whim. Even thought rates are rising now, they can stop these acct in 18…24…30 months. Maybe better off finding a big checking accout bonus and tie up funds for 6 months (450.00 Citizens bank bonus/ CIT bank 2.4% rate w/o any strings…etc. Just saying. Too much record keeping with the NFCU method… Maybe good for retiree with lots of time.

NFCU doesn’t offer add-on CDs at the rates you have there.

The add-on CDs are either the specials or the SaveFirst which pays 1.35% right now. For that you can choose any period between 3 months to 5 years and deposit as little as $5 but it’s still 1.35% even if you select five years.

1 Like

Thanks for clarifying. Maybe that’s why it’s too good to be true, if it’s not offered regularly except as a special?

I know that I picked up a 40-year CD from them a few weeks ago that has a high rate (3.5% I believe) that says I can add money at any time. So I opened it up with the minimum required, figuring worst case scenario, at the 1 year to maturity mark, I could drop in however much money I can afford to lock up for 1 year and get a rate that’s probably much higher than 1 year CDs at the time.

I like the way you think, TripleB. It appears that it’s a limited time offer. Now I understand why :slight_smile: