ANY news on the Navy FCU 18mo 3% cd?
I have seen nothing, heard nothing, on the 18 month.
But both of those NFCU CDs are obviously very high yielding in these marketplace circumstances, and both could easily be in jeopardy.
Anybody on the bubble needs to pick up the telephone and call NFCU to learn where things stand.
President Trump this morning called on Fed chairman Jay Powell to reduce interest rates to zero or lower. I hope everyone here has locked in decent, longer term, CDs. This could be quite a ride going forward:
Trump calls for severe interest rate reduction
Just checked online. The NFCU five year 3.25% APY CD remains available today. 3.25% is much higher than zero.
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Just an additional thought pursuant to the above:
Q: Does it make any sense right now to be breaking certificates maturing in, say, 2020 or 2021 and investing the proceeds at todayās high rates?
Well, first of all, most of us have add-on CDs already purchased, ready, and waiting to receive those proceeds when those certificates mature naturally, thus avoiding payment of any sort of EWP (early withdrawal penalty).
Thing is, if interest rates decline to an extent even close to what is being tweeted, no financial institution will be able to pay everyone (for example) 3.3% APY a year or two from now when so much money will be seeking shelter in those add-ons.
In other words, the add-on CD protection we all are counting on might not be there when time comes that we need such shelter. Traditional CDs bought now, on the other hand, are more likely to weather the storm.
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I have seen this argument before. In say two to three years from now and the Fed rates drop to near zero, would GTE be able to absorb perhaps several tens (or hundreds) of millions of dollars in CD add-ons and pay out 3.25%? In such a scenario, what are the options available to GTE?
In my experience I have witnessed several options:
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The FI finds a way to absorb the loss . . .somehow
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The FI attempts to limit its losses by eventually capping the add-on privilege. In my experience this resulted in legal action being initiated against the FI.
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The FI goes belly up and is taken over by another FI.
Sometimes I have witnessed a combination of the above outcomes befalling the woebegone FI.
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Would you recommend breaking 2021 3% CDs with a one-year interest penalty?
I think this is a bit of an over-reaching statement on the safety of CDs. Itās true that traditional CDs are safer than addons because of how the deposits are used. Addons are a bit tricky since they wonāt know when they could get a large influx of money. But the safety of CD rates also has a lot to do with the strength of the bank/CU involved. For a small CU like GTE, this is definitely a concern. For NFCU or PenFed, it is a smaller concern. I thought Penfedās 5% 10-yr CDs would not survive to term but weāre 16 months away now from maturity and they held up even though Iām sure Penfed is bleeding a ton of money from them.
Personally, Iād not rush to lock an immediate 6-12 month interest loss to secure hypothetical guarantees. Iāll just not put all my eggs in one basket and not rely on one addon CD only.
That said, each situation is a bit unique in terms of maturity, rate difference, terms, strength of bank/CU so each CD would have to be evaluated on its own in terms of risk vs reward of breaking one CD to lock in another.
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Shinobi, would you recommend breaking 3% 2021 CDs with a one-year interest penalty?
Let me be as clear as Iām able. And I apologize for any possible misunderstanding:
I recommend NO SUCH action. Am only trying to make participants here aware of what is happening, for example in the case of this morningās POTUS tweet. It is up to each person here to decide for himself and for herself what to do going forward. Period.
I can tell you what I am doing. So far I have closed nothing early. That decision could change. For example:
If the FOMC next week cuts a half point, instead of the anticipated quarter point, I would take that into account and consider it a significant event.
Agreed. Totally. But, whether we like it or not, the most prominent and important add-ons today are found at the smaller credit unions . . . which are as you point out the least dependable should the worst ensue.
My best add-on CDs are at GTE and at Freedom CU. My NFCU add-on is very short and not very useful or important to me.
I have a bunch of the NFCU 3.5% CDs. But those are not add-ons.
Thatās right shinobi.
We each decide on our own but sometimes we hear of a good deal out of the blue. (usually from you). From experience, you must act swiftly or itās gone. 
Right now Iām going to sit tight with my last additions. No CD maturityās worth mentioning until the middle of October. Big one with Navy FCU will mature at that time. The way things are going now, probably will go with one of my add-onās.
Can someone confirm that the Navy Federal 10 month 2.75% cd was an addon? I have it written as so but google is not helping to confirm. (and if so do you recall the limit on contributions?)
Yes, the NFCU 2.75% was an add-on up to 100K.
Thank you @turtlebug. Thatās the only cd I have maturing in 2020 so Iām booked till at least 2021. Any extra funds outside the āemergency fundā will be allocated to the 10 dividend stocks I purchased (currently up 5% from purchase price which is nice to look at but is mostly irrelevant since the dividend was the important aspect).
Now itās time to wait and watch. I HATE waiting.
Easy way to tell if a NFCU CD is add on is to try doing a transfer from Savings to that CD. If it shows up as an option, it is an add-on CD.
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This is for information only regarding GTE. Itās my data point, no more:
On background, I have a modestly close relationship with a few reps at GTE on account of my past hustle CD activity there. I speak with them constantly because the hustle CDs are numerous which necessitates a lot of tending.
This morning a key rep there told me response to their 3.3% APY CD deal was overwhelming. I doubt that surprises the CD mavens who participate here. This is merely confirmation of what you already knew. The rep said that particular CD also gave rise to a raft of new GTE members. Again, not a shock Iām certain for readers here.
Bottom line, though, there are so very many owners now of the 3.3% GTE CD. Consider, too, there surely must have been huge numbers of other people, unable to get in at 3.3%, who opted for the 3% GTE add-on instead, that CD being not much better for GTE when the going gets rough.
Put the two together and I see overwhelming inflows of money into GTE should prevailing rates descend significantly. Itās a recipe for trouble in my view. In addition, even today Ken only gives GTE a B+ health rating. So if youāre planning to add on to your GTE add-on CD, my thinking is do it sooner rather than later. If interest rates fall and stay low, I will be shocked if GTE remains able to pay us 3.3% APY on (what will be for them) new money.
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Add-on CD diversity
For those seeking to invest in an add-on CD not named GTE, I want to reiterate something I posted about a month back. I just checked. Rising Bank continues to offer their add-on CD at the same interest rate as before. Here is a link to my earlier post:
Link to Rising Bank add-on - rate has not fallen
Rising did not generate a lot of interest a month ago because the rate was lower than GTE, because of the high $25K buy in, and because of the half million dollar cap.
That was then. This is now. Today those negatives might be seen as contributing to a more stable add-on situation than the one offered by GTE. The high buy-in and lower rate mitigate in favor of fewer entrants. The cap protects the bank in event of off scale high inflows should prevailing rates tank in future.
The Rising Bank interest rate is not as high as GTEās rate. But if prevailing rates fall to between one and two percent, that Rising rate will not be too hard to take. And Rising might end up being there for us when GTE is not.
Q: Yeah, shin. Howās about if interest rates tumble to BELOW one percent?
I refuse to even THINK about that scenario!! It would be very bad indeed.
ETA
Neglected to mention Ken gives Rising Bank an A+ health rating. So bank is more likely to remain standing and be there paying the promised high interest rate in future even if prevailing circumstances deteriorate.
Unfortunately, the only way to add to my GTE CD now or in the near future is to close other CDs I own and pay significant EWPs in the meantime. I may end up regretting not doing it but as of right now I am unwilling to pay those penalties.
If you are using GTE Iād make sure that all your money currently there or added later is covered by insurance (FDIC for bank and NCUA for credit unions) by adding PODās or having a joint account. This will cover you in the event the institution folds. (check with your institution to verify they support POD)