6% APY CD
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wabmester
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If you're thinking of buying CDs (or treasuries), absolutely. Buy all three terms -- you're getting about 120 bp over market.
They're doing that again? Crap. Yep, here it is-- Effective August 31, 2006 - September 27, 2006.d said:
(Muttering expletives as I calculate the payback on a six-month penalty for cancelling a NFCU five-year 5% CD in only its second year.)
Duh, no calculator required. I'll lose 2.5% right away and gain 1% per year, so even the three-year CD at 6% is a better deal than continuing at 5%.
I'll be back later...
Good point. Three issues:retire53 said:
1.) We've already burned out our quarter-point raises (members since 1978 & '79).
2.) We're one year into a five-year CD. Cashing it in loses six months' interest (2.5%) and buying the 18-month CD at 6.25% only recovers 1.25x1.5=1.875%, so we'd still be short another 0.625% and hoping for renewal at no less than 5% for no less than 2.5 years. I'd have to hope that would be at least 5% for no less than that time in order to maintain what we're getting now.
3.) PenFed has rates almost as high but in much smaller minimum amounts. I can break our years' spending cash into multiple smaller CDs instead of having to do this in transactions of NFCU's $15K or more. That way if we happen to need to break a CD we'd only have to break them one at a time (for smaller penalties) instead of the whole account.
Setting up the PenFed CD was pretty painless. $5 for a share savings account, $20 donated to the NMFA (the only way I'd qualify for membership), and requesting the CD with an EFT from our brokerage. All done online in about 30 minutes, and reading the fine print was the toughest part of it.
wabmester
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Nords said:
It's even less painful if you already have an account. Took me a couple minutes to buy 4 CDs today. And I *love* that they let you prespecify maturity options. I still can't get over how many banks make you jump through hoops (within 7 days after maturity) to prevent a CD from rolling over at maturity.
It's 2 Sep on the east coast as I type this, and NFCU has rendered the 6.25% discussion irrelevant.retire53 said:
They no longer offer their 18-month CD.
Maybe it'll be back-- they frequently change their mortgage rates. But I'm not hanging around this time...
Spanky
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wabmester
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Bump. This is the last day for the 6% CD deal (unless they extend it).
Most CD's in the 3-5 year range pay close to 5%, and treasuries pay even less. Not a bad deal.
Most CD's in the 3-5 year range pay close to 5%, and treasuries pay even less. Not a bad deal.
OAG
Thinks s/he gets paid by the post
Need to watch the compounding on these things. If you read the fine print (who does?) you may note that there may be such terms as "simple", "daily", "monthly", "semi-annual" compounding. Of course "daily" is the best. Have seen some ads where the APY and APR are the same which indicates "annual compounding" which is not good. Have note done the Excel to see exactly how much you lose with annual versus daily but is it significant over a multi-year CD. Now that I mentioned this I will have go check......
Well, for 6% annual interest compounded daily, the number would beOld Army Guy said:
[1+(.06/365)]^365 - 1 = 6.18311% or an additional 3.05%. But I don't know if that relationship is linear.
2%: an additional 1.00%.
10%: an additional 5.16%.
14%: an additional 7.32%.
Seems close enough to linear over the range of interest rates we're likely to see...
OAG
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Checked and you are pretty correct -- actually reaches 3.118% advantage at 10 years on a 6% APR. Wish I knew where PFCU was going tomorrow.
OAG
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Me too -- I timed the T-Bill maturity wrong.... BTW anybody have any idea how long after maturity you will wait for the t-bill proceeds to hit the linked account?
Ok Old, you made your point, now drop the subject.........
Ok Old, you made your point, now drop the subject.........
I didn't realize that some financial institutions actually do daily compounding. Out of curiousity, do any do continual compounding by approximating e? Although I don't think it would make much of a percentage difference over daily compounding.Old Army Guy said:
magellan_nh
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ok, at the risk of sounding dumb, I didn't think the compounding method really matters as long as the APY is higher.
For example, an annual compounding CD that pays an APY of 6.0% is better than a daily compounding CD that pays and APY of 5.99%.
If you're quoted the simple interest rate, then you need to do the math to figure out the effects of compounding, but if you're quoted an APY, the compounding isn't so important.
Am I confused?
Jim
For example, an annual compounding CD that pays an APY of 6.0% is better than a daily compounding CD that pays and APY of 5.99%.
If you're quoted the simple interest rate, then you need to do the math to figure out the effects of compounding, but if you're quoted an APY, the compounding isn't so important.
Am I confused?
Jim
I think you've got it right. The APY is simply a way to express the total annual yield, taking the compounding into consideration.magellan said:
Banks are compelled to state the APY as a means to easily compare the real return against competing banks.
OAG
Thinks s/he gets paid by the post
Just looked at Bank of America site. They have a 4 and a 5 year CD where the APR and APY are the same. To me that is annual compounding. Go to another institution and the APR is the SAME as BOA but the APY is higher. Which indicates the institution compounds at a rate better than BOA but, here again, it may be MONTHLY, SEMI-ANNUAL, or QUARTERLY compounding. Just a minor thought, unless you use CD's over the long (10 plus years) term. At this timing small numbers will add up. Just a minor thought and since the numbers on a single particular CD are small and some would say "not worth being considerate of".
astromeria
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And yet there are those who don't want the government to get "involved" in businessash said:
OAG
Thinks s/he gets paid by the post
Good example of how Compounding is done can be found at BankRate.com. When you pull up best rates by CD for either Banks or Credit Unions the listing has a column "CM" compounding method. The also show the APR/APY but the "CM" can effect the APY between institutions.
Ok "Old" you made your point, no sense in beating it to death, now let the subject die...............
Ok "Old" you made your point, no sense in beating it to death, now let the subject die...............
Because with a government education, we can't expect people to be able to calculate an APY themselves, right? Or even be sure of what one is?astromeria said:And yet there are those who don't want the government to get "involved" in business
