Anyone using CD right now?

Stephanie2167 · February 2016

I have our eFund in a Capital One Savings account at 0.75% APY. It's been awhile since I've had any money in a CD. Remember when CD rates were awesome? So Capital One has a 36 month CD at 1.30%. Would you give that a chance? I wouldn't put all our eFund into it but about 75%.

julieanne912 · February 2016

I don't, but isn't the point of an Efund to have it somewhere you can access it pretty quickly, without penalty? Meaning, you wouldn't want to put it somewhere it has to sit for a certain period of time.

So question is, what's the penalty for early withdrawal for that 36 month CD? Does the penalty pretty much negate any benefit the higher interest rate gives you?

cbee817 · February 2016

We have some $ in CDs- we did a CD ladder of 1-5 years. This August, the 1 year will be up and we'll move it to a 5 year, next year, we'll take the 2 year one and move it to 5 year, etc, etc. Our rates are 1.15% - 2.3%. At this point, we already have a regular savings account (e-fund), a vacation account, fully fund our Roths, contribute to 403b/401K, 529 plans for our girls, so this $ is designated for an extreme emergency (aka I lose my job and can't find anything for a long time). It can probably do better in something else, but for now, I'm ok with it sitting safe just in case.

Stephanie2167 · February 2016

We'd be able to move about $25k to the CD and still have $11k liquid if needed. We're also continuing to put more money into the liquid each month. Just mot sure we should keep $36k in a savings at 0.75%. We wont be buying a house for quite some time (military).

formerlyGDaisy09 · February 2016

people often advise to have 3-6 months of expenses liquid, meaning easily accessed without peanalty. so I'd do a quick calculation of what you'd need to get by on a bare-bones budget for 3-6 months and then consider putting the rest into a CD if that's what you're comfortable with.

hoffse · February 2016

Those rates just aren't high enough for me. I would want to get a higher return if I was tying up my money for 36 months.

Stephanie2167 · February 2016

hoffse said:

Those rates just aren't high enough for me. I would want to get a higher return if I was tying up my money for 36 months.

This is what I was looking for. I haven't looked into CDs for years since the rates went way way down. So I was surprised to even see them close to 1.4%.

csuave · February 2016

Like @cbee817 we have part of our efund in a CD...the part we consider to be "extreme emergency."

With H unemployed a large efund gives me comfort. Our bank pays squat interest on savings so when I noticed a sign in their window for a 14month CD at over 1% (13 months ago) I jumped on it.

Their current 14 month rate is 1% flat so I think I will continue but with less so that we have something available if rates go up and then I would start a ladder.

This is a good article and the second page has link to a nice calculator that explores short term vs long term at a higher rate and when the break even on the penalty is.
http://www.forbes.com/sites/robertberger/2015/04/02/how-to-find-the-best-cd-rates/#3b2a53d43418

We could do better than our squat savings and low interest CD, but I like having everything in one place and accessible with one log-in. Plus the branch is less than a 5 minute walk. For our liquid efund the rates don't concern me that much since I don't view it as investment money.

dragonstarjk · February 2016

I would probably do it, but I'm of a different mindset than a lot of others on this board. You're still going to have $11K available immediately.

We are comfortable with a small e-fund. We have $1K liquid and $2K in a 5-year CD. Having that money tied up makes it easier for us to not touch it in case it were a true emergency, because we'd have to take a penalty. Long term, I plan on doing a CD ladder as pp mentioned.

I would consider anything over 1% to be a decent CD rate these days. Our 5-year rate at our local bank is 2.1%, which we got when they were having a special promotion. I don't know that we'll ever see rates in the 4-8% range like they were 20-30 years ago. It would be nice, though!

jtmh2012 · February 2016

I currently have 3 3% 1-yr CDs through Navy Federal.

I keep an eye on Deposit Accounts for bank and CD rates. Not affiliated with them, I just happen to check it once a week.

As for "locking up" your emergency fund. Most of the CDs I get only have a penalty of the last quarter's worth of interest other's may vary. But in the event of a true emergency (ie. job loss, major disaster, etc), I'm not going to cry over the loss of that minor amount of interest. However, I'm not breaking the CD for things like car repairs, etc. As for ease of access. Ask how long it takes to break it. Usually this can be done with a phone call or a branch visit, but again, check your terms.

vlagrl29 · February 2016

I would not do it - I like to get cash easy if we need it. Our e fund is in a high interest savings - 4% on the first $1500 and 1% on the remaining balance.

dragonstarjk · February 2016

jtmh2012 said:

I currently have 3 3% 1-yr CDs through Navy Federal.
I keep an eye on Deposit Accounts for bank and CD rates. Not affiliated with them, I just happen to check it once a week.
As for "locking up" your emergency fund. Most of the CDs I get only have a penalty of the last quarter's worth of interest other's may vary. But in the event of a true emergency (ie. job loss, major disaster, etc), I'm not going to cry over the loss of that minor amount of interest. However, I'm not breaking the CD for things like car repairs, etc. As for ease of access. Ask how long it takes to break it. Usually this can be done with a phone call or a branch visit, but again, check your terms.

Totally agree with this. If I was to break my 5-year CD right now, I'd forfeit about $80. If it's a TRUE emergency, I'm not going to worry about that $80, but it's also incentive for me not to use it for anything else.

I can cash in the CD with just a phone call or a visit to the bank. (Actually, I work at the bank, but as a customer, it's as easy as a phone call or branch visit). Takes less than five minutes to access that money. I would have a harder time getting money from a high-yield online account as that would take a few days to transfer.

I'm not trying to say one way is better than the other, just advocating for the less popular option in case there are some misconceptions about how it works

Anyone using CD right now?

Re: Anyone using CD right now?

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