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Too good to be true?
Old 01-06-2005, 07:58 AM   #21
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Too good to be true?

In March I'll need to decide whether to put a year of our two-year cash stash in a CD or an I bond.

I've already decided that a one-year CD is a loser while a five-year CD is probably worth the (low) risk of an early-withdrawal penalty.

But with PFCU pushing five-year rates like this, it makes me wonder if their crystal ball is cracked or if they're really expecting rates to rise that quickly.

I bond or a five-year CD-- is this strictly a yield decision?
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Re: Too good to be true?
Old 01-06-2005, 09:03 AM   #22
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Re: Too good to be true?

Quote:
In March I'll need to decide whether to put a year of our two-year cash stash in a CD or an I bond. *

I've already decided that a one-year CD is a loser while a five-year CD is probably worth the (low) risk of an early-withdrawal penalty.

But with PFCU pushing five-year rates like this, it makes me wonder if their crystal ball is cracked or if they're really expecting rates to rise that quickly. *

I bond or a five-year CD-- is this strictly a yield decision?
I think so, as long as you can yank the money fairly painlessly in both cases. FWIW, I think that the 4 year CD (rate is 5%) is probably an even better deal than the 5 year.
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Re: PFCU CD Alert
Old 01-06-2005, 09:28 AM   #23
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Re: PFCU CD Alert

Quote:
I just called Penfed and was inquiring about their 5 Year CD's. I had asked the question if it was better to buy 10- $5,000 CDs instead of 1 - $50,000 CD.
When I first opened an account with PenFed, they actually suggested this idea to me without my asking.
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Re: PFCU CD Alert
Old 01-06-2005, 10:33 AM   #24
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Re: PFCU CD Alert

Quote:
I just called Penfed and was inquiring about their 5 Year CD's. I had asked the question if it was better to buy 10- $5,000 CDs instead of 1 - $50,000 CD.

If you needed $5,000 cash, you would only have to pay the Penalty on 1 $5,000 CD instead of the entire $50,000 CD.

There is a minimum invest of $1,000. Their seems to be no advantage to Purchasing 1 CD over multiple ones. I'm thinking $5,000 would be the highest I would want to go.

Anyone else have any thoughts on this?
Hi CT,

When I put money in their CD's, last year at 5.25% as well, I did just that. I divided my large deposit into almost 30 CD's. it created a lot of paper work and postage (for them) which is too bad. Other financial institutions allow you to withdraw parts of a large CD without closing out the total CD.

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Re: PFCU CD Alert
Old 01-06-2005, 11:12 AM   #25
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Re: PFCU CD Alert

>>Other financial institutions allow you to withdraw parts of a large CD without closing out the total CD.

Mine(Bellco) does allow this. I haven't checked with PenFed, but are you saying that they do not allow partial withdrawals?
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Re: PFCU CD Alert
Old 01-06-2005, 02:25 PM   #26
 
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Re: PFCU CD Alert

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Mine(Bellco) does allow this. I haven't checked with PenFed, but are you saying that they do not allow partial withdrawals?
I posed this very question over the phone and that is what they told me. So I proceeded to purchase smaller denomination Certificates. Can't hurt, I guess.
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Re: PFCU CD Alert
Old 01-06-2005, 04:43 PM   #27
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Re: PFCU CD Alert

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I haven't checked with PenFed, but are you saying that they do not allow partial withdrawals?
PentFed as of last March 2004 did not.

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Re: PFCU CD Alert
Old 01-06-2005, 07:28 PM   #28
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Re: PFCU CD Alert

Yup, it's right their on their application/disclosure. No partial withdrawals except for IRA certificates.
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Re: PFCU CD Alert
Old 01-08-2005, 08:29 PM   #29
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Re: PFCU CD Alert

I went ahead and filled out the online application form today. I noticed though that to be a member you have to open and own a Regular Share account which requires a daily balance of $500. Otherwise you get hit with a $7.50 monthly fee.

Does this mean that I have to leave the $500 in the Share account for the term of the CD, i.e 4 years?

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Re: PFCU CD Alert
Old 01-09-2005, 12:17 AM   #30
 
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Re: PFCU CD Alert

Dante,

you must have misread the fine print. The regular share account is required to have a minimum deposit of $5.00 (perhaps it was hard to see the decimal in the fine print). There is no fee for maintaining this low balance (i checked). You are refunded the $5 if you close out all your accounts, plus interest.
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Re: PFCU CD AlertNaturegal,
Old 01-09-2005, 08:24 AM   #31
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Re: PFCU CD AlertNaturegal,

Naturegal,

Thanks for the reply.

The $5.00 initial deposit allows you to open a Share account and thereby be eligible for membership into the CU. But then do you close out the Share account immediately therefater? And get the $5 back?

If the account is not closed, it will require a minimum balance or the maintenance fee.

Maybe it is just as simple - open the account with the$5 and then don't have to do anything with it. Iam not sure though.

Dante

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Re: PFCU CD AlertNaturegal,
Old 01-09-2005, 08:46 AM   #32
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Re: PFCU CD AlertNaturegal,

Quote:
Maybe it is just as simple - open the account with the$5 and then don't have to do anything with it. Iam not sure though.
I opened an account last March with them to get the 5.25% CD and yes it was that simple.

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Re: PFCU CD Alert
Old 01-09-2005, 09:56 AM   #33
 
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Re: PFCU CD Alert

Dante,

The account rep I talked with said the $5 just stays there and it is fully refunded (with interest) if you close out all your accounts with them. Not sure what the purpose of the $5 is- I guess it gives you an account for them to put your CD in when it matures, if you don't want to renew it right away.
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Re: PFCU CD Alert
Old 01-09-2005, 10:57 AM   #34
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Re: PFCU CD Alert

My CU (DCU) has the same requirement. For whatever reason (some inhouse rule or some government requirement) you are required to have a share/savings account to be a member, and the minimum balance on it is $5.

Its a cool lesson in compound interest though. I've had that five bucks in there since 1980, and twice the balance has gone over $10 and I've gotten to skim five bucks out

Maybe I should have left it and seen how my five bucks had grown at normal savings rates for 30 or 40 years.

Now my CU just has to get off their butts and raise their CD rates. They were pretty good until the last few months. Now they're lagging.

I'm still a little leery of committing to anything longer term than a year or two in this rising rate environment.
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Re: PFCU CD Alert
Old 01-09-2005, 12:55 PM   #35
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Re: PFCU CD Alert

Quote:
I'm still a little leery of committing to anything longer term than a year or two in this rising rate environment.
I feel the same way, so I have not committed to any CD more than 1 year in duration.
For what it's worth, all banks forecast interest rates and base their rates on what they think the future will hold. *I think it was during the Clinton years that short-term rates were higher than long-term rates at some banks.

If the bank is willing to lock in their interest expense at 5.25% for 5 year CDs, they are probably forecasting interest rates to go to 7% or higher in the next 5 years for similar instruments. *They will have a ton of cash at a 5.25% expense while other banks may have to dish out a higher expense.
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Re: PFCU CD Alert
Old 01-09-2005, 01:38 PM   #36
 
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Re: PFCU CD Alert

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I'm still a little leery of committing to anything longer term than a year or two in this rising rate environment.
I would leery also, if it were not for the 6 month penalty on early withdrawal. If you own the CD for a year and then bail, you still get 2.675% interest. - Not too shabby.

So, I only look at as commiting for 1 year.
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Re: PFCU CD Alert
Old 01-09-2005, 01:58 PM   #37
 
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Re: PFCU CD Alert

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I would leery also, if it were not for the 6 month penalty on early withdrawal. If you own the CD for a year and then bail, you still get 2.675% interest. - Not too shabby.

So, I only look at as commiting for 1 year.
I would agree except for other options that offer more than 2.675% and still remain liquid. ibankdesign.com provides a list of checking/saving/MM accounts with decent APYs.
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Re: PFCU CD Alert
Old 01-09-2005, 02:15 PM   #38
 
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Re: PFCU CD Alert

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I would agree except for other options that offer more than 2.675% and still remain liquid. *ibankdesign.com provides a list of checking/saving/MM accounts with decent APYs.
Maybe decent APYs, but not 5.25%! - If you hold the PenFed CD 2 years - You'll get the full 5.25% for the first year and 2.675% for the second. That is close to 4% APY.

If you have any liquid MM accounts that are paying close to 4% per year, please let us all know. We'll all be signing up
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Re: PFCU CD Alert
Old 01-09-2005, 03:46 PM   #39
 
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Re: PFCU CD Alert

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So, I only look at as commiting for 1 year.
O.K. FWIW. My point was that if you're looking at committing to only 1 year with a 6 months penalty then you'll earn less than a 3% MMA/savings/3 months CD account currently available at various banking institutions.

OTOH, if you're looking to commit for 2 years with the 6 months penalty, you'll break even plus or minus $100 if you can earn 3.5% for the 1st year and 4.5% for the 2nd year gambling on the fact that you can not find these rates at some institutions that will offer them at some point during the next two years. I'm betting that I can find these rates and better but to each his own.
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Re: PFCU CD Alert
Old 01-09-2005, 05:51 PM   #40
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Re: PFCU CD Alert

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I would leery also, if it were not for the 6 month penalty on early withdrawal. If you own the CD for a year and then bail, you still get 2.675% interest. - Not too shabby.
Yep, that's my thinking. Furthermore, how long has everyone been saying rate hikes are right around the corner? Two years? Three years? Money has been lost sitting on the sidelines. This is a way to avoid hits if rates do take off as expected, but it also provides a fairly decent return if they don't.
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