CDs???? Lets talk pro/con
They are pretty straight forward, you put your money into a CD for a period of time with a locked in rate.
Ive got a CD ive had for years and just roll it over. The problem is, I was getting 6% 10 years ago and barely getting 3% now. And you have to lock in for over 5-7 years to get those rates.
I like CDs for their "safe" factor , I know they are only as safe as the bank they are in, im in a pretty good credit union, so im not worried about that.
I can get my money at any time from a CD, Ill lose some of the interests be taking it early but I wont lose any of the principle.
Anyways. thinking of getting another CD here soon thru my bank, itll be 2.60% @ 5 years or 3.40% @ 7 years. Those arent great rates but what are the other options?
Anyone know of places giving better rates on CDs.
Im not going back into the PM game til it drops to my price point buy in, so thats not an option right now.
So my option is either leave it in savings to draw .50% or put it in a long term CD at 2-3%.
Im not goint to invest or get into the stock market, I dont know enough to do so and dont trust anyone to do it for me. lol.
Just wondering what other options may be there , etc.
Haven't been a big fan of CD's since rates went to shit. I just don't see any benefit at 2%-3%; I'd rather take my chances on semi-safe stocks or mutual funds.
I like the idea of CDs being more "liquid" than stocks/funds/bonds/IRAs, etc.
That is why im a fan of them. It sux that the rates are garbage, but I like to have better access to my money than anything else out there can offer, short of savings/checking accounts.
I have no idea why anyone would ever do CD's for almost any reason. You can get as good or better rates with a money market account, have check writing privileges, FDIC insurance if you pic the right ones, and not be penalized when you take your money out. Oh and your rate can go up as opposed to a CD which is fixed. And in this market you don't want that rate to be fixed because you can only go up from the bottom. my .02 though
I looked into that, but that only works when CD rates arent falling and that is what they have been doing. That is why i jumped into and went long term at a measily 3%
As someone mentioned before, a money market account would probably be a better choice. It is far more flexible and has similar rates. Also, CDs are not very liquid at all and aren't traded much. They can be redeemed for a fee though. You could also look into index-bond ETFs and bond mutual funds. Also, I am kind of confused why you prefer CD's for their safe factor, but also mention you invest in PMs . Many stocks would be far less volatile than the PM market now, be more liquid, and have an expected higher return.
Originally Posted By die-tryin:
I looked into that, but that only works when CD rates arent falling and that is what they have been doing. That is why i jumped into and went long term at a measily 3%
Laddering would be much better. You want to lock in that 3%, but rates could rebound in 6 months and you would be stuck. If you laddered you could reinvest that $ into the new rate or reinvest into something else. Last time I checked, which was a month or so ago, rates rose from the last 3 months.
These guys have covered it. You might as well go for a money market account for better liquidity, or a bond fund for better returns. There's no point in CDs at current rates.
Not sure where you guys are getting your rates and would luv to know. But CD rates have fallen. Im with one of the highest CDs rates right now at 3.40% APY, the best MMA ive seen is 1.14%. This is part of why in CDs. I want my money to draw some interests with no risk, I dont touch the money, that is why I have no problem locking it in at the highest rates.
If rates were to increase than I would do the laddering easily. like I said, I looked into it but also looked at the trend in the markets and just seen CD rates going down, they are holding fast (not going down or up)
CDs are liquid IMO,obvious not as liquid as cash in my safe or even a savings account, the money is still accessable to me, not like 401k or IRAs, etc. The only penalty I lose might be some of the interest earned, I never lose the principle and the money is insured and locked into whatever rate Im at.
I check rates weekly, if not daily, they havent gone up at all. Ive only seen them go down. And not sure how the MMA works I guess, but the rates of return ive seen arent any better than my savings account.
Im all for checking out new products and doing the research but I just havent found what im looking for, let alone better than a CD right now. Im not going to invest in anything that I could lose any money on. I dont lose with a CD and dont know how the MMA works (just yet). Also the rates im finding dont exactly have me ready to write a check or transfer into one.
Anyone got any good links for MMA?
Originally Posted By die-tryin:
Not sure where you guys are getting your rates and would luv to know. But CD rates have fallen. Im with one of the highest CDs rates right now at 3.40% APY, the best MMA ive seen is 1.14%. This is part of why in CDs. I want my money to draw some interests with no risk, I dont touch the money, that is why I have no problem locking it in at the highest rates.
If rates were to increase than I would do the laddering easily. like I said, I looked into it but also looked at the trend in the markets and just seen CD rates going down, they are holding fast (not going down or up)
CDs are liquid IMO,obvious not as liquid as cash in my safe or even a savings account, the money is still accessable to me, not like 401k or IRAs, etc. The only penalty I lose might be some of the interest earned, I never lose the principle and the money is insured and locked into whatever rate Im at.
I check rates weekly, if not daily, they havent gone up at all. Ive only seen them go down. And not sure how the MMA works I guess, but the rates of return ive seen arent any better than my savings account.
Im all for checking out new products and doing the research but I just havent found what im looking for, let alone better than a CD right now. Im not going to invest in anything that I could lose any money on. I dont lose with a CD and dont know how the MMA works (just yet). Also the rates im finding dont exactly have me ready to write a check or transfer into one.
Anyone got any good links for MMA?
Looking at my last statement, the longer CDs have been going up very slightly, anything under about 3-5 years has been slipping. I got my two different bank CD rates mixed up for my 6 mo CD. It sounds like you are OK with tieing up your $, don't want to mess with it, and you don't want much risk. I say go for the CD then.
The penalty can be somewhat high, usually 1/2 a year's worth of interest from my experience(depends on maturity of CD).
Also, you can take out contributions from your Roth IRA, but not earned income without a penalty. So you could put $ in a Roth IRA and then buy CDs without paying taxes on the interest.
Ally Bank has a 2-year CD at 1.49%, and if rates go up, you can get a one-time rate increase during those two years. The only charge 60-days interest for early withdrawal. Seems like a decent deal.
Originally Posted By Schive:
These guys have covered it. You might as well go for a money market account for better liquidity, or a bond fund for better returns. There's no point in CDs at current rates.
This summarizes you answer very clearly and concisely.
Money market > CD, more liquid and no penalties.
Originally Posted By Averagebear:
Originally Posted By Schive:
These guys have covered it. You might as well go for a money market account for better liquidity, or a bond fund for better returns. There's no point in CDs at current rates.
This summarizes you answer very clearly and concisely.
Money market > CD, more liquid and no penalties.
Uhm not really, not sure if youve read this thread or not.
MMA 1.14%
CD 3.40%
Im not worried about the money being on lock down for 5-7years. I understand the appeal MMAs have, but lower interest rate than a CD isnt one of them. If I needed to cash out of a CD, id only be losing a small portion of the interests.
What is the penalty for pulling your money out of a CD before it matures?
What bank is giving a 3.4% rate now?
Originally Posted By banana-clip:
What is the penalty for pulling your money out of a CD before it matures?
What bank is giving a 3.4% rate now?
I think the Penalty is YTD interests, so if Ive been in it for 3 years and 3 months, id lose 3 months of interests. I wouldnt pull the money unless I really had no choice. But I can pull it, and I dont have to worry about it like the stock market, etc.
Rates are based on length of time and amount put in. Just have to shop around, there are a few that pay decent (atleast for todays standards).
Originally Posted By die-tryin:
Originally Posted By banana-clip:
What is the penalty for pulling your money out of a CD before it matures?
What bank is giving a 3.4% rate now?
I think the Penalty is YTD interests, so if Ive been in it for 3 years and 3 months, id lose 3 months of interests. I wouldnt pull the money unless I really had no choice. But I can pull it, and I dont have to worry about it like the stock market, etc.
Rates are based on length of time and amount put in. Just have to shop around, there are a few that pay decent (atleast for todays standards).
I've been looking at CDs for a while now and the best i found is 3.0% from some bank in California. I think you have to start up a savings/checking account there to get the rate. I bank with USAA and they usually have the highest rates, but I think the highest i found there is around 2.4% for 5 years, which isn't very good at all. That 3.4% you found sounds really good for todays rates. I might find a good rate and ladder them just in case i needed the money. I don't think we will every see the high rates we had years ago on CDs.
CD rates aren't getting any better anytime soon and rates are dismal all around. I wouldn't have any qualms about locking in for five years. It will probably take that long to fully recover anyway. If you want to earn more interest then you are going to have to look at investments no two ways about it. There are some very conservative investments you could get into with a reasonable rate of return. Talk with your bank/credit union's financial advisor/investment representative. You've got a lot of options.
Working at a bank, we deal a lot with customers who get fixated on the CD as the investment of choice and then get upset when the rates aren't in the 4's or 5's or even 3's. Our four year rates are topping out a 1.5% - barely enough to meet the rate of inflation. It's silly to see people squabbling over another half a percent. If I had $5000 or more I would be speaking with investments. Anything less than a 10% return is chum-change if you're serious about making your money work for you long-term and 10% is nowhere close to as aggressive as you could be. You gotta give some to get some.
I have 5 12-month CDs ( laddered @ $5000 each) they mature every 10 weeks, so
they all don't mature ot the same time.
This is my "Emergency Fund" (about 6-9 months living expenses)
In one year I have access to that $25,000 portfolio- risk free, penalty-free.
I don't ever plan on changing the strategy until I retire and pay my house off,
both in 5 years.
My mortgage is set to be paid off in 5 years.
It makes sense to me because I can't afford to pay my low-interest rate mortgage
off in one fell swoop, because interest rates can go up in 2-3 years.
In other investments yes, I do own bonds, but those net asset values (N.A.V.) with flucuate,
but I can wait to cash those in, drawing (higher than CD ) interest as time goes by.
That's my $.02 worth, hope ot helps.....
I have looked into the laddering, but I found that I wouldnt gain as much. The more you put into a specific CD all at once will net more money in the end than putting a little each week. I understand the purpose of the laddering but with CD rates going down and down, id rather get locked in while I have the chance. I wish they would stay steady or even rebound. I just dont see that happening.
I have a question;
Is $5,000 a good return on a 7 year investment?
You have to use a rate of return not a dollar value to measure return. Otherwise it isn't comparable and misleading(you ever notice talk show hosts say Exxon make billions of dollars a year? They make like a ~3% return; is that a lot?)
Depends on what you define as good. In my eyes, I would say no(for CDs right now). It gets real easy for inflation to rise a little, and you've broke even or lost $$ since the rates are so low.
Originally Posted By _Soggy_:
You have to use a rate of return not a dollar value to measure return. Otherwise it isn't comparable and misleading(you ever notice talk show hosts say Exxon make billions of dollars a year? They make like a ~3% return; is that a lot?)
Depends on what you define as good. In my eyes, I would say no(for CDs right now). It gets real easy for inflation to rise a little, and you've broke even or lost $$ since the rates are so low.
The rate of return would be 3.40% APY.
I agree, its very hard to compete with inflation other than buying goods, you buy them now and then when prices rise, youve already stockpiled. Im doing this with ammo and mags. Get em while prices are low.
