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Certificate Of Deposit rate
Old 04-04-2008, 09:41 PM   #1
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Certificate Of Deposit rate

My current CD is a 13 month 5.21 interest rate (5.34APY) CD which expires this October. It's been generating a monthly payment of around $400 every month. Question(s):
#1. Are there better rates out there?
#2. When this is due in October, will it stay the same or can I re-neg to a higher rate? (if I threaten to close it out?)
#3. Anyone have recommendations?
Thank you....
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Old 04-04-2008, 09:54 PM   #2
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danno1 - welcome to the site.

#3) Ask this question again in October. Who knows what rates will be then...

DD
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Old 04-04-2008, 10:18 PM   #3
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Unless interest rates see an increase between now and October, then no, it is unlikely that you'll be able to get the same, or a higher rate. The bank or credit union may have some wiggle room that they can use to try and keep you as a customer, but it is unlikely that you'd be able to get a similar 12-13 month CD over 5% in the current market. In fact, anything over 4% would be a good rate for a 1-year CD right now.

So, I'd certainly use the power of negotiation to get a better rate, but you should be expecting to receive a rate that is less than what you have been getting the past year if interest rates don't change, or decrease in the coming months.
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Old 04-04-2008, 10:36 PM   #4
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Quote:
Originally Posted by danno1 View Post
My current CD is a 13 month 5.21 interest rate (5.34APY) CD which expires this October. It's been generating a monthly payment of around $400 every month. Question(s):
#1. Are there better rates out there?
#2. When this is due in October, will it stay the same or can I re-neg to a higher rate? (if I threaten to close it out?)
#3. Anyone have recommendations?
Thank you....
Welcome to the board danno
to answer your questions,
1) not at this time
2) it will go to whatever the prevailing rate is ... I am not sure you would have any wiggle room to negotiate a substantially larger rate. Most instituitions won't lose money on a cd.
3) google cd interest rates and shop cd rates if you have a big (looks like you have about 90K) amount to invest.
If you find over a 5% rate then 'book it danno' ... damn I've been waiting a lifetime to be able to really use that in a conversation.
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Old 04-05-2008, 06:36 AM   #5
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Without going "long" (like a 7 year CD; and even that rate is below 5%) I would suggest finding a good FDIC or NCUA Insured MMA and "park" it for awhile (if my math ability is not failing me it looks like you have about $7,500 in your current CD). HSBC is paying about 3.05% APY for MMA On-line savings. I use several very good Credit Unions (Navy FCU, Pentagon FCU, and a smaller one in FL (VyStar)); Navy FCU & Pentagon FCU are #1 and #2, respectively, in size for Credit Unions, usually have about the best rates available (not too good right now). Personally, any extra money I have I just park it at HSBC and will wait for better rates - which I am guessing may come NEXT YEAR.
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Old 04-05-2008, 01:03 PM   #6
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I'm not a math whiz but it looks like Danno's cd is generating $4800 in interest every year ("generating a monthly payment of $400 a month"). So that would be near $100,000 CD? That might give you some leverage with the bank in negotiating....
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Wow - great response
Old 04-05-2008, 01:56 PM   #7
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Wow - great response

DBLDoc, Jeremy, MegaCorp, RWood & BestWife.....Muchas Gracias. All input is going to be taken to heart as the year progresses. This being an election year, it's hard to predict what the CD market will be at, 12 months from now. Which is why I asked the initial question. MegaCorp, if they won't allow me wiggle room at the time it runs it's course, I might pull it all out and re-invest in another 1 (maybe two year) deal elsewhere. Yes, it is exactly $90K but it fluxuates (not always $400 every month) as some months are so short - like Feb payment I received in March was relatively smaller than normal. Well, I figured it's around $14 per day in interest. I don't know if anyone here can recall the "glory days" of CD's when they were first introduced to the public....some were 16.00%! (I think more!) Of course, the economy was different then.

(BTW RWood...your time for Uncle Sam on my behalf was appreciated. Thank you)
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Old 04-05-2008, 02:21 PM   #8
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See it was early in the morning and my math was lousy. I see it is a $90K CD. I would still do what I said about putting it in a MMA and wait for better rates. That much money, if in CD's, IMO should be laddered to mitigate the current situation.

And Danno, I appreciate the personal comment very much.
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MMA (more info)
Old 04-05-2008, 02:26 PM   #9
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MMA (more info)

Sounds good RWood....can you elaborate a bit more on these MMA's you speak of? Simply PM me or post it here for posterity. In depth feedback appreciated! I'll print it out and keep for reference when the time comes. As for "laddering", I had considered it, but last fall, not many banks were offering the 5.21 I found (this is a very sparsely populated area) and finding a few different sources to invest into would have been a hassle (paperwork-wise), and this is only a 12 month deal....so . . . . .
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Old 04-05-2008, 02:41 PM   #10
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When the time gets closer to maturity date, try looking here for rates:
CD Thread, Post The Best Rates You Can Find Here!
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Old 04-05-2008, 02:49 PM   #11
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OK - glad I found this forum. Have it as a desktop icon and will lurk and look and really appreciate this info!
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Old 04-06-2008, 02:40 AM   #12
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Quote:
Originally Posted by danno1 View Post
DBLDoc, Jeremy, MegaCorp, RWood & BestWife.....Muchas Gracias. All input is going to be taken to heart as the year progresses. This being an election year, it's hard to predict what the CD market will be at, 12 months from now. Which is why I asked the initial question. MegaCorp, if they won't allow me wiggle room at the time it runs it's course, I might pull it all out and re-invest in another 1 (maybe two year) deal elsewhere. Yes, it is exactly $90K but it fluxuates (not always $400 every month) as some months are so short - like Feb payment I received in March was relatively smaller than normal. Well, I figured it's around $14 per day in interest. I don't know if anyone here can recall the "glory days" of CD's when they were first introduced to the public....some were 16.00%! (I think more!) Of course, the economy was different then.

(BTW RWood...your time for Uncle Sam on my behalf was appreciated. Thank you)
yeah and my mortage was 12.5% and inflation was a b*tch. Eventually the 16% rate went away and the economy was still in the dumpers. At least that is my recollection.
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Old 04-06-2008, 07:42 AM   #13
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Originally Posted by danno1 View Post
Sounds good RWood....can you elaborate a bit more on these MMA's you speak of? Simply PM me or post it here for posterity. In depth feedback appreciated! I'll print it out and keep for reference when the time comes. As for "laddering", I had considered it, but last fall, not many banks were offering the 5.21 I found (this is a very sparsely populated area) and finding a few different sources to invest into would have been a hassle (paperwork-wise), and this is only a 12 month deal....so . . . . .
Last year with interest rates relatively high and with the likelihood of going down in the coming months to a year, you probably did the right thing by locking in the best rate you could find at the time. But when rates are low, it could be better to create a laddering strategy so that you don't have a big chunk of money earning 3% when six months into the term you could find the same CD for 4% if rates begin to go up again.

Of course, it is hard to say how things will play out leading into October, and then beyond, but something to consider.

This is where the money market accounts could come into play since the interest rate should adjust to any rate changes not long after they happen. So unlike a CD that locks you in, your money should have the flexibility to react to any rate changes. Again, not as good of a deal in a decreasing rate environment, but if the rates look to be stagnant or possibly rising, this could keep you from holding the bag on a one year or more CD when you could be getting a better rate.

So, hopefully by October we'll have a better idea of where the economy is headed so that you can make the best decision.
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Old 04-06-2008, 08:17 AM   #14
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Let me add one more potential strategy:

If longer term (3 to 5 year) CD rates are significantly higher than short term CD and money market rates, one way to play the game is to find the highest yielding longer CD with the smallest early surrender penalty. For example, last I checked, you could get a 4% or so yield on a Pen Fed 5 year CD with a penalty of 6 months interest. If short rates are more line 1.5% in October and you can still get 4% or so at Pen Fed, the 5 year CD is a no brainer, snce the surrender penalty would be 2%, but in a year's time you would haveearned an extra 2.5%.
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Old 04-06-2008, 08:24 AM   #15
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That is a good point. If the spread between long and short term rates is large enough, taking the penalty could actually still leave you ahead in the event of changing rates.
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Old 04-06-2008, 09:05 AM   #16
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Fantastic information I am absorbing....
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Old 04-06-2008, 09:09 AM   #17
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Btw, longer term CD's I back away from....simply from the standpoint that I'd like to buy a house sometime in the future and have some "freed up" cash on hand for the downpayment. I recently emailed a person at my local bank and never did get my credit score I asked about. I know they can easily provide one, since my brother who is with a credit union got his. I believe it was in the form of an actual FICO score. The in-depth feedback regarding my initial question though, has been appreciated. Lots of good insight and advice. I hope I can recall this thread when Oct. rolls around. Oh, and "book 'em Danno" is one of my favorite catch-phrases. I miss those old shows like McGarret and those other ones like Barnaby etc. I try watching Friends or Will & Grace (no I'm not!) and never can figure out what is so hilariously funny with all the garbage they throw around on these newer programs.
(remember Cannon?)
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Old 04-07-2008, 02:41 PM   #18
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Quote:
Originally Posted by danno1 View Post
My current CD is a 13 month 5.21 interest rate (5.34APY) CD which expires this October. It's been generating a monthly payment of around $400 every month. Question(s):
#1. Are there better rates out there?
#2. When this is due in October, will it stay the same or can I re-neg to a higher rate? (if I threaten to close it out?)
#3. Anyone have recommendations?
Thank you....
#3- I have a CD ladder I use. Instead of one CD with all money in it, I have 3 smaller CDs maturing at regular intervals so each CD captures the prevailing rate at that time. In my case I use 90 day CDs which mature every 30 days. In your case I am suggesting 7 month CDs which mature every 210 days (you will need 7 CDs spaced 30 days apart to use this technique).

Instead of a single 90k 5% CD for 13 months, how about 7 13k CDs with 7 month durations.

Buy one CD for 13k when current CD matures for 7 months. Put another 39k into a 90 day CD. Put other 38k in savings. Next month pull 13k from savings and open a 7 month CD. The third month pull 13k from savings and open another 7 month CD. When 90 day CD matures, keep that in savings and open a 7 month CD on 1st of each month.

In 7 months you will have a ladder. One CD maturing each month. That CD will lock in prevailing rates at that time. If rates improve next month, you can lock in another CD with that rate in 30 days. If rates drop, you know that 6 of your 7 CDs have a better rate than the prevailing rate.

Thsio will take a long time to set up (Oct of 08 to start, April of 09 would be last CD opened, May of 09 would be when first CD matures). If you needed access to this money at once, it would take you 7 months to actually get it. Might be good, might be bad, depending on need.

**this technique does not improve return, but it does reduce the interest rate risk associated with a single larger CD**
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Old 04-07-2008, 03:45 PM   #19
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wunderbar!

Thank you jIMOh . . . . how did you initially devise this laddering technique. You know, prior to my depositing into that CD last fall, I looked into laddering but it all seemed so convoluted and I realize now, it takes some effort (not just depositing & forgetting these) and keeping track of time & specific expiration dates, right? Something I hadn't considered back then! Also, I live in a very rural sparsely populated region of the upper midwest so banks are not plentiful. There is a Wells Fargo, Citizens, Superior Ntl and another one I keep a business checking account with.
Ironically this afternoon, the banker gal I had set me up with this particular CD emailed this afternoon after I asked her a favor (supplying her with specs) and she finally got back with my credit (FICO) score . . . she said I'm at 797....but I haven't taken out any bank loans for over 20 years - only dealing with credit cards (had a few, now only one). I cancelled a couple several years ago...which I now realize I should not have done. Living & learning at half a century old!
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Old 04-07-2008, 03:52 PM   #20
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Also, I live in a very rural sparsely populated region of the upper midwest so banks are not plentiful.
So what? Any bank in the US will happily take your deposit via mail.
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