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Slow Fixed Income Payments (Rant?)
Old 04-01-2024, 11:12 AM   #1
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Slow Fixed Income Payments (Rant?)

Maybe I should just post this in the pet peeve thread but I wanted to “vent a bit louder” and didn’t want my post lost in the sea of whining with all the other pet peeves.

So, In the past few years I have accumulated a plethora of CD’s in my brokerage account ranging in 9mo to 24mo laddered maturities. I prefer CD’s that pay interest monthly for two reasons. (1) I can reinvest the interest in “something” else, or (2) use the interest if it’s needed (or wanted). So, my complaint (vent) is about half of these CD’s do not pay the interest on time. Usually, they are only a day or two late but occasionally even longer, but it irks me to no end.

If roles were reversed and I had a loan from any of these financial institutions, I bet they would expect (demand) I make my payments on the actual due dates! I guess the old Golden Rule adage applies here, “Those who have the gold”, make the rules.”

Now, from my naturally suspicious nature, I feel like they are using these funds as a float for a few extra days. I mean in many cases they are delaying paying out “millions” in interest payments to their client base. I’m sure (assume) it’s legal but it still irks me as the little guy. Oh, and I’ve been keeping track of those who consistently payout their interest payments late and I don’t buy from them again. Rant Off!

Anyone else notice this “practice” or even care?
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Old 04-01-2024, 11:15 AM   #2
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Quote:
Originally Posted by Car-Guy View Post
Maybe I should just post this in the pet peeve thread but I wanted to “vent a bit louder” and didn’t want my post lost in the sea of whining with all the other pet peeves.

So, In the past few years I have accumulated a plethora of CD’s in my brokerage account ranging in 9mo to 24mo laddered maturities. I prefer CD’s that pay interest monthly for two reasons. (1) I can reinvest the interest in “something” else, or (2) use the interest if it’s needed (or wanted). So, my complaint (vent) is about half of these CD’s do not pay the interest on time. Usually, they are only a day or two late, but it irks me to no end.

If roles were reversed and I had a loan from any of these financial institutions, I bet they would expect (demand) I make my payments on the actual due dates! I guess the old Golden Rule adage applies here, “Those who have the gold”, make the rules.”

Now, from my natural suspicious nature, I feel like they are using these funds as a float for a few extra days. I mean in many cases they are delaying paying out “millions” in interest payments to their client base. I’m sure (assume) it’s legal but it still irks me as the little guy. Oh, and I’ve been keeping track of those who consistently payout their interest payments late and I don’t buy from them again. Rant Off!

Anyone else notice this “practice” or even care?
This seems only true for Brokered CDs, it may be the Broker themselves cashing in on the delay. My CDs in Credit Unions pay spot on when they are due.

PS. It is a pet peeve of mine too. Just to put it into perspective for a $250k CD paying 5% it is ~$34.35 a day!
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Old 04-01-2024, 11:24 AM   #3
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Vanguard gave me credit on 2 CD's on 3/28 that were due 3/31. 3 day weekend so I couldn't do anything with the cash anyway.
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Old 04-01-2024, 11:31 AM   #4
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^^^^^
I'm okay (understand) when the due dates fall on a weekend or holiday. It's when they delay payments on business days.
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Old 04-01-2024, 03:46 PM   #5
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Originally Posted by ShokWaveRider View Post
This seems only true for Brokered CDs, it may be the Broker themselves cashing in on the delay. My CDs in Credit Unions pay spot on when they are due.

PS. It is a pet peeve of mine too. Just to put it into perspective for a $250k CD paying 5% it is ~$34.35 a day!
I really doubt that the brokerage is cashing in on the delay.
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Old 04-02-2024, 04:59 AM   #6
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My experience...
Almost always happens at Schwab
Never happens at Fidelity
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Old 04-02-2024, 06:41 AM   #7
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^^^^
Now that is interesting. Makes me wonder who is really at fault!
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Old 04-02-2024, 07:37 AM   #8
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I have the same Wells Fargo monthly paying CD at Fidelity as at Vanguard, and noticed that the funds appear in Fidelity's settlement fund one day in advance of Vanguard.

IIRC, it was the same for treasuries.
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Old 04-02-2024, 08:16 AM   #9
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All the treasuries I've bought from VG paid at the close of business on the maturity date, so available next day at the latest. Interest from Ally and VG happens on exactly the same day every month. Never had a delay...
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