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Good CD deal?
Old 10-27-2015, 12:36 PM   #1
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Good CD deal?

My local Credit Union has a CD special 47 months for 2.27%. There is a 360 day early withdrawal penalty. Is this good? I've never invested in a CD before but my first thought is it's a good rate but too much of a penalty. Only worth it if you're sure you won't need to withdraw early. What do you think?
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Old 10-27-2015, 12:44 PM   #2
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Synchrony Bank offers similar rates for a 5 year CD with only 180 days interest penalty for early withdrawal.


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Old 10-27-2015, 12:57 PM   #3
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Rate is very good, but 360 days interest penalty s about 180 too many IMO
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Old 10-27-2015, 02:32 PM   #4
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Rate is very good, but 360 days interest penalty s about 180 too many IMO
If the rate is really good then does that make-up for the high penalty?
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Old 10-27-2015, 03:01 PM   #5
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I saw the title and thought back to the days of the old RCA music club where you got to buy somthing like 13 albums for a penny! Did they last to the days of the CD?
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Old 10-27-2015, 03:07 PM   #6
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Originally Posted by aaronc879 View Post
My local Credit Union has a CD special 47 months for 2.27%. There is a 360 day early withdrawal penalty. Is this good? I've never invested in a CD before but my first thought is it's a good rate but too much of a penalty. Only worth it if you're sure you won't need to withdraw early. What do you think?
The 5 year TIPS rate is 0.25% and "if" inflation averages 2% that would translate into a nominal 2.25% for 60 months. Plus you get inflation protection. I'm not doing this but it's something to think about as a comparison.
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Old 10-29-2015, 08:24 AM   #7
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Originally Posted by aaronc879 View Post
My local Credit Union has a CD special 47 months for 2.27%. There is a 360 day early withdrawal penalty. Is this good? I've never invested in a CD before but my first thought is it's a good rate but too much of a penalty. Only worth it if you're sure you won't need to withdraw early. What do you think?
A 360 day early withdrawal penalty is a lot. Most CD's I have seen are 90 to 180 days. However, a 2.27% CD rate is pretty good these days. From my perspective the biggest risk with longer term CD's is a sudden and rapid rise of interest rates. Which would seem unlikely anytime soon with the current monetary manipulation. Of course many here would argue the bigger risk with CD's is not keeping up with inflation or missing out in stock market run ups, but that's another story.
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Old 10-29-2015, 08:49 AM   #8
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Ally offers 5 year CD at 2%. Depending on the principal, that 0.27% difference could be minimal in terms of actual dollars. Ally's early withdrawal penalty is 150 days interest, so less penalty potential in exchange for nominally lower interest.
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Old 10-29-2015, 09:24 AM   #9
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Barclays has a 5 year CD @ 2.25%, 180 day early withdrawal penalty.
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Old 10-29-2015, 12:23 PM   #10
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I look at CD's as a long term plan if I can't stand to lose the initial investment. If I am comparing early withdrawal benefits of one vs. another, maybe a CD isn't the best investment for me at this time. So long as I can get my money back in an emergency, then that is good by me. Losing interest is acceptable, losing principal is not.


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From my perspective the biggest risk with longer term CD's is a sudden and rapid rise of interest rates. Which would seem unlikely anytime soon with the current monetary manipulation.
I would expect that within the net year, we will see at least one increase, wouldn't that translate into a higher CD interest rate being offered at that time?
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Old 10-29-2015, 10:13 PM   #11
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I would expect that within the net year, we will see at least one increase, wouldn't that translate into a higher CD interest rate being offered at that time?
I suspect we will see slow movement to raise interest rates over the next year but I also suspect it will be small and slow. CD rates should follow afterwards but that too would be small and slow. But who really knows.
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