CD rates on the rise

[Cooper]

For those of you who keep a savings account, check out the new CD rates at Citibank. Effective 8/9-8/15.

1 year 2.50%
1 year no penalty for early withdrawal 1.50%
18 month 2.75%

 

[samhexum]

29 minutes ago, Cooper said:

For those of you who keep a savings account, check out the new CD rates at Citibank. Effective 8/9-8/15.

1 year 2.50%
1 year no penalty for early withdrawal 1.50%
18 month 2.75%

 

Not that I want to rain on anyone's parade, but at 2.50 %, it would take you roughly 29 years to double your money.  At 1.50%, it would take roughly 48.

I always laugh when banks trumpet their interest rates.  They've been so low for years that any little raise still results in bupkis.

What Is the Rule of 72?

The Rule of 72 is a quick, useful formula that is popularly used to estimate the number of years required to double the invested money at a given annual rate of return.

The Rule of 72 comes in handy for mental calculations to quickly gauge an approximate value. For this reason, the Rule of 72 is often taught to beginning investors as it is easy to comprehend and calculate. The Security and Exchange Commission also cites the Rule of 72 in grade-level financial literacy resources.

Years To Double: 72 / Expected Rate of Return

To calculate the time period an investment will double, divide the integer 72 by the expected rate of return. The formula relies on a single average rate over the life of the investment. The findings hold true for fractional results, as all decimals represent an additional portion of a year.

Edited August 9, 2022 by samhexum
just for the hell of it

[BananaBagel]

Rates are likely to go up as the fed continues to increase rates. If you’re buying CDs, I’d ladder them and come in and out over time to capture higher rates. 

[pubic_assistance]

2.5% ??

How sad.

Well that's definitely not a viable retirement plan !

[mike carey]

Term deposits (as they are called here) are still well below the rate of inflation (and the interest payments are taxed) so it's not exactly a growth strategy to invest in them. At best, short term deposits are a place to earn some interest while you park the funds pending some other use for them. I'm far more interested (pun not intended) in my main bank (alone AFAIK) paying 1.75% on my transaction account. Most such accounts pay at most 0.1% p.a. It's inevitable that people have some funds that they need to have fast access to, whether that's immediately or in a few weeks or months. Any interest on that money is a bonus.

[Cooper]

A certificate of deposit, or CD, is a bank account that pays you a higher interest rate in return for locking your money away for a certain period of time. And, yes, it’s  FDIC insured. 

For the past few years, with interest rates so low, there wasn’t much interest in them. People who prefer maintaining a large savings account might choose a CD over a regular savings account. You can open a CD for different  periods of time, ex 3 months up to 5 years. 

One of the recent changes my bank is now offering is the “no penalty” CD. It allows you to withdraw your principal + interest before the maturity date with no penalty.  So, if CD rates go up, you can withdraw your money and open a new CD with a higher rate. 

If you were to open a $100,000. 18 month CD at a 2.75% interest rate, at maturity you’d have added $4,125 in interest. 

Yes, there are other safe &  secure ways of investing your savings and getting higher rates. The CD is just one example. The feeling on CD rates is that they’ll be going up as the Federal Reserve increases their rates. 

[BuffaloKyle]

My high interest savings account right now pays me 1.75% and they have been raising it at the end of every month with the fed rate hikes so it's gonna be at least 2.00% soon so not much of an additional benefit. Depending on how much you're going to put into CDs  also I'd recommend buying $10k in i bonds first. 

[Rudynate]

When I opened my very first savings account at age 7 or so, I think the rate was 4 or 4.5 %.

Edited August 12, 2022 by Rudynate
spelling

[+ augustus]

CD rates are rising, finally, and it's something even though it's not keeping up with inflation.  You can actually buy a Treasury with a 12–24 month maturity at a higher rate than what Citibank is now offering and it's free of state income tax.  It is easy to do on Fidelity.  As the Fed drains reserves from the banking system, the brick and mortar branches will need to raise rates to retain and attract deposits.

[Jim_n_NYC]

My Ira/401K's from work are at Fidelity.  I've started buying 3 month CD's for that last 6 months or so to keep the cash there semi-liquid to see how rates pan out.  I just bought some this week and got 2.4% to 2.5% on them.  The ones I bought 3 months ago were at 0.8%, just to show you how rates are doing.  It's hard to predict, but when it seems like all this rate hiking is over (or close to it), I'll probably buy some 2 or 3 year CD's to lock in some good rates.

[BananaBagel]

Betterment APY is inching up on cash savings. They are at 1.6%. I’m mostly in robo investing thought - hoping for a rebound. 

[+ The Big Guy]

I have found the best place to shop for FDIC Insured CD’s is through my broker account at Schwab.  They have been far more competitive than my local banker.  You do have to watch out that some of them are callable meaning you end up with a shorter term than expected.  

[Jim_n_NYC]

22 minutes ago, The Big Guy said:

I have found the best place to shop for FDIC Insured CD’s is through my broker account at Schwab.  They have been far more competitive than my local banker.  You do have to watch out that some of them are callable meaning you end up with a shorter term than expected.  

Yea, I use Fidelity and they are rated at the top of rates compared to others.

[+ augustus]

UPDATE:  The 1-year Treasury yield hit 4% today.  Some economists, though, are saying that this is a sign of deteriorating liquidity in the government bond market as interest rates increase and QT takes hold.  There is so much debt outstanding and a strong possibility that there are not enough buyers out there.

[+ BenjaminNicholas]

I was really sad to open this thread and soon realize it wasn't about cross-dressing on the rise.

[handiacefailure]

On 8/9/2022 at 3:20 PM, Cooper said:

For those of you who keep a savings account, check out the new CD rates at Citibank. Effective 8/9-8/15.

1 year 2.50%
1 year no penalty for early withdrawal 1.50%
18 month 2.75%

 

I refuse to deal with Citi, they really screwed me over two years ago.   They just closed my accounts stating they decided not to business with me any longer and made me forfeit almost $700 I had in rewards on my credit card.   No issue with them closing the account but really pissed me off they wouldn't give me the $700, if I tell Citi I no longer want to do business with them, I'm still expected to pay my balance.

That's a poor return on one year at the 1.5%.   A online credit union I use is paying 1.7% right now and they have a promo for new customers that if you put in $100 a month they'll give you $100 after a year and I see interest rates rising not falling.

If someone hasn't reached their max yet for the IBond limit they are better off going that route.   The return after 18 months will definitely be over 2.75% and even if you want to cash out after 18 months and get stuck with the 3 month interest penalty the return is still a lot higher than doing an 18 month CD.

[BuffaloKyle]

On 8/10/2022 at 11:27 AM, BuffaloKyle said:

My high interest savings account right now pays me 1.75% and they have been raising it at the end of every month with the fed rate hikes so it's gonna be at least 2.00% soon so not much of an additional benefit. Depending on how much you're going to put into CDs  also I'd recommend buying $10k in i bonds first. 

As I posted above my savings account did go up and is now at 2.10%. It is gonna increase with the fed rate hike next week once again too. Once the fed looks like they are done doing hikes then I may consider CDs. But I'll be able to invest more money into I bonds as well before we get to that point anyway.

[handiacefailure]

4 hours ago, BuffaloKyle said:

As I posted above my savings account did go up and is now at 2.10%. It is gonna increase with the fed rate hike next week once again too. Once the fed looks like they are done doing hikes then I may consider CDs. But I'll be able to invest more money into I bonds as well before we get to that point anyway.

 

4 hours ago, BuffaloKyle said:

As I posted above my savings account did go up and is now at 2.10%. It is gonna increase with the fed rate hike next week once again too. Once the fed looks like they are done doing hikes then I may consider CDs. But I'll be able to invest more money into I bonds as well before we get to that point anyway.

What bank pays 2.1% interest?   I'd like to open an account there.   Right now I'm only getting .1.7

[BuffaloKyle]

44 minutes ago, handiacefailure said:

 

What bank pays 2.1% interest?   I'd like to open an account there.   Right now I'm only getting .1.7

I am a member of Citizen's Access. They require a $5,000 minimum balance to get that rate. You could get the same rate right now though with CIT Bank that has no balance requirement. Here are the best online bank rates currently:

https://www.bankrate.com/landing/savings/rates/

[TorontoDrew]

On 8/10/2022 at 11:27 AM, BuffaloKyle said:

My high interest savings account right now pays me 1.75% and they have been raising it at the end of every month with the fed rate hikes so it's gonna be at least 2.00% soon so not much of an additional benefit. Depending on how much you're going to put into CDs  also I'd recommend buying $10k in i bonds first. 

Up north of the border, our equivalent of 1 yr CDs are paying almost 5%.  For me that's more attractive than bonds

Edited September 18, 2022 by TorontoDrew

[BuffaloKyle]

On 9/17/2022 at 7:02 PM, handiacefailure said:

 

What bank pays 2.1% interest?   I'd like to open an account there.   Right now I'm only getting .1.7

And now it just went up to 2.35%! You can get higher than that too from looking at that website I posted. And it'll go up again soon with another federal interest rate hike today.

Edited September 21, 2022 by BuffaloKyle

[+ augustus]

UPDATE:  Jerome Powell said today that the consensus of the FOMC is to raise rates between 100-125 basis points at the next 2 meetings of 2022.   He also said that even after today's hike, interest rates are at the "very low level of restrictive monetary policy".  Therefore, it seems to be best not to go too long on maturity if you are looking to lock money in for the longer term.  It's not easy to catch the peak but the Fed seems determined to squash inflation.  But don't believe them 100%.  In the past they have reversed course quickly when the economy showed rapid deterioration.  

[Jim_n_NYC]

DoC's website has this page that lists a lot of high rates for savings accounts, CD's, etc.

https://www.doctorofcredit.com/high-interest-savings-to-get/

I'm currently at Comenity getting 2.9%, Vio 2.8%, and Bask getting 2.75%.

Edited October 4, 2022 by Jim_n_NYC

[+ keroscenefire]

Capitol One is giving 3.25% on 12-month CDs. Just did $5k and will earn $163 for basically doing nothing. Still have another $5k that I am going to wait for slightly higher rates that I think will be coming soon.

[Frequentflier]

I've been buying T-bills on Fidelity and Schwab - secondary market mainly. For as short as 3 months I can get over 3% and the interest is not taxable at the state level.  And of course if someone should need to liquidate early its easier to sell a T-bill than cash out a CD early.