What's the current best Bank CD rates available?

LearnMS

Level 2 Member
#1
Hello all,

I have a 2-year CD with Ally where the interest rate is locked in at 1.65% after I opted to raise the interest. Now, obviously interest rates just increased and regular savings rate is much better.

I still got 8 months before I can break this CD. But I am thinking to break this CD now, eat 2 months early withdrawal penalty and open a 5 year CD. I am also thinking to open multiple CDs with variable amounts incase I need to withdraw due to any emergency.

Good idea?

Any thoughts where I can find > 3 % CD banks? I know that non-ally banks have strict early withdrawal penalties. TIA.
 

volker

Level 2 Member
#2
All numbers at the current lowest rate, if you CD is bigger your interest can be higher, too.

$1000 in the current CD at 1.65% is $1.375/month in interest
$1000 in the 1yr CD at 2.10% is $1.75/mo in interest (assuming you keep it for 12months)
$1000 in the 5yr CD at 2.5% is $2.083/mo in interest.

Your penalty is loss of 2 of interest:
Penalty: 1.65% CD = $1.375 * 2 = $2.75 in loss
Keeping it: 1.65% CD = $1.375 * 8months = $11 in interest
2.10% CD: $1.75 * 8months - $2.75 penalty = $11.25
2.5% CD: $2.083 * 8months - $2.75 penalty = $13.914

To answer your question to break the CD or not: You would come out ahead with even the 12month CD (if you keep that CD for 12months).

Regarding other savings accounts, please check the Doctor of Credit website which has a great list on https://www.doctorofcredit.com/high-interest-savings-to-get/

A CD latter could make sense. But also ask yourself if a 2month penalty in an emergency is the end of the world (vs. being fine with 2.5% over 5yrs).

With the constant interest rate changes over the last year you should also ask yourself "will the rates go up, stay or go down in the next year(s)?". I see it with my 2yr old CD I am now 1yr in and the rate increase are crazy (and good but "bad" for my old CD). A CD ladder can be beneficial here: You get more the average interest rate. You reduce the gamble on rates while settling on the average. Or you can try to find your own number of interest you are fine with. Like 2.5% or maybe everything above 2% if you think inflation will only be 2% in average over the next decade (yet another gamble) and that's all you want.
 

LearnMS

Level 2 Member
#4
All numbers at the current lowest rate, if you CD is bigger your interest can be higher, too.

$1000 in the current CD at 1.65% is $1.375/month in interest
$1000 in the 1yr CD at 2.10% is $1.75/mo in interest (assuming you keep it for 12months)
$1000 in the 5yr CD at 2.5% is $2.083/mo in interest.

Your penalty is loss of 2 of interest:
Penalty: 1.65% CD = $1.375 * 2 = $2.75 in loss
Keeping it: 1.65% CD = $1.375 * 8months = $11 in interest
2.10% CD: $1.75 * 8months - $2.75 penalty = $11.25
2.5% CD: $2.083 * 8months - $2.75 penalty = $13.914

To answer your question to break the CD or not: You would come out ahead with even the 12month CD (if you keep that CD for 12months).

Regarding other savings accounts, please check the Doctor of Credit website which has a great list on https://www.doctorofcredit.com/high-interest-savings-to-get/

A CD latter could make sense. But also ask yourself if a 2month penalty in an emergency is the end of the world (vs. being fine with 2.5% over 5yrs).

With the constant interest rate changes over the last year you should also ask yourself "will the rates go up, stay or go down in the next year(s)?". I see it with my 2yr old CD I am now 1yr in and the rate increase are crazy (and good but "bad" for my old CD). A CD ladder can be beneficial here: You get more the average interest rate. You reduce the gamble on rates while settling on the average. Or you can try to find your own number of interest you are fine with. Like 2.5% or maybe everything above 2% if you think inflation will only be 2% in average over the next decade (yet another gamble) and that's all you want.
Thanks for breaking it down. I have automated many things in the past, until this year. Now with Insight option gone, WM MO not working, not getting excited with OD/OM GC deals, I am re-evaluating my current MS plans for the future. While I do that (may take months), I plan to identify a bank with decent CD rate and not worry about it for a while.

I also wonder what others in the forum are doing better and what's working for them.
 

Suzie

Level 2 Member
#6
If you can join NFCU (Navy Federal), they have a 12 month CD option at 3% with $3k max deposit. It's only good once per account.
 

volker

Level 2 Member
#7
I also wonder what others in the forum are doing better and what's working for them.
I have all goal savings (like emergency savings, new car, property taxes & house maintenance etc) with Ally. I could shop around and get some more interest but for these savings I find my time more worth over switching banks every 1-2yrs.

On top of that I started to increase my emergency savings a few years ago by buying government i-bonds. You can't cash them out in the first 11month. A lot of clicking on sales if you buy them once a month automatically, since everyone is its own bond. Merging multiple bonds into one is a bit confusing (how they show the current interest rate) so I didn't do that. Outside of these "downsides" I am pretty happy with the inflation protection, which is what I care about for this money. With increasing interest rates I plan to combine some 0% base-interest ones in to some higher interest ones (even with them I have been often ahead my Ally saving accounts due of the inflation).
 
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