I am sure some will mention I-bonds but that does not interest me. Would something like this CD interest you or no. Thanks guys.

Is this a thought exercise is there someone offering you a cd at 5.25%. What are the details of the CD if it is real? Is there a minimum or maximum investment amount? fees or expenses?

Risk free CD at 5.25% for 9 months? Sure. Why not.

Yes, real. Through a CU. Yes there is a minimum. Not sure what it is. But significant. Maybe $10k or more. They are trying to increase deposits so this is only available for a short time. Not sure how long. Until they reach the threshold they desire. Have ten days at the end of the term to tell them what you want to do or they will re-enroll in another 6-month CD.

quote:

Have ten days at the end of the term to tell them what you want to do or they will re-enroll in another 6-month CD.

At a much lower interest rate. Make sure if you're interested in this you mark the date on your calendar and show up to move it out or move it into another.

I would jump on that.

Could this be a red flag that the bank is in trouble if they need deposits?

If you don't need that money for the next 9 months, it's worth considering.

But if you think you might need that money in the next 9 months, or you aren't sure, consider a high yield savings account instead.

There are several banks now offering 4.25%+ interest on savings accounts. And unlike a CD or I-Bonds, your money in a savings account isn't locked down for a specified period.

That extra flexibility may be worth the 1% lost interest, such as with your emergency "rainy day" savings fund.

The other thing to consider is that interest rates are still rising. Dumping all your money into a CD now locks in that interest rate for the life of the CD. Whereas some of the high yield savings accounts continue to raise their interest rates for all their customers as their rates go up along the way*. So there's the possibility that you might lock in a 5.25% CD instead of a 4.25% savings account today, but then in 6 months than savings account might be up to paying 6.25% while the CD you locked in is still paying 5.25%.

(*Note that not all banks do this. Some of their high yield rates are introductory rates for new customers only. But some banks do. For example, my emergency fund is in a high yield savings account with Bask Bank, and they've raised their savings account interest rates for all customers 10 times in the last 6 months alone, and they're currently sitting at 4.15%.)

FDIC insured at a stateside bank? If so only risk is better rates coming along. If you have a broker they probably have better rates and you can pull your money out without huge penalty if needed

quote:

Could this be a red flag that the bank is in trouble if they need deposits?

^^^^^^^^^^^^^
Even if banks fail, your money is insured up to 250k by the FDIC.

quote:

Originally posted by ZSMICHAEL:
Even if banks fail, your money is insured up to 100k by the FDIC. The amount may even be higher.

FDIC coverage is $250k.

Some banks hold even higher deposit insurance through other organizations besides just the FDIC, such as the Massachusetts Depositors Insurance Fund that can provide additional deposit insurance beyond the initial $250k FDIC coverage for accounts in some participating banks located within the state of Massachusetts.

4.25%? Dang that's good!
My Ally savings account is now paying 3.3% by comparison. When I first started it was the best on the block at 2%, then went down as low as .6% or so, now back up again.

Rogue makes very good points on this topic btw.

5.25%? I’d jump all over that.

quote:

Originally posted by apprentice:
4.25%? Dang that's good!

A quick Google showed at least one bank offering 4.35% on savings accounts today.

Just be sure to check the fine print, and check reviews for the bank.

For example, does that bank raise its rates for existing customers when their interest rates rise, as discussed in my prior post?

And does that bank have any funky fees, rules, or limits? For example, one high yield savings account bank I looked at (Salem Five Direct) offers a very competitive interest rate, but when you read the fine print they have a $5k daily limit on withdrawals, and a $20k limit on total withdrawals within a rolling 30 day window. So if you were to make a one time deposit of $50k in that bank, it could take three months to get your $50k back out.

quote:

Originally posted by ZSMICHAEL:

FDIC insured at a stateside bank?

OP was talking about a Credit Union, not a bank.

FDIC does not insure Credit Unions.

I just took a 7 month cd @ 4% today at my local bank, Stockyards Bank & Trust, sybt.

quote:

So if you were to make a one time deposit of $50k in that bank, it could take three months to get your $50k back out.

^^^^^^^^^^^^
That is some class A bullshit. My brokerage can buy CDs and I was buying like crazy when Carter was President. 17 or 18 percent. The brokerage firms have leverage and that stuff does not happen.

quote:

Originally posted by V-Tail:

quote:

Originally posted by ZSMICHAEL:

FDIC insured at a stateside bank?

OP was talking about a Credit Union, not a bank.

FDIC does not insure Credit Unions.

NCUA coverage is the same thing for credit unions as FDIC is for banks: federal-backed deposit protection for your first $250k at that bank/credit union.

So as long as that bank or credit union is covered by FDIC or NCUA, same-same.

quote:

Originally posted by V-Tail:

quote:

Originally posted by ZSMICHAEL:

FDIC insured at a stateside bank?

OP was talking about a Credit Union, not a bank.

FDIC does not insure Credit Unions.

Yep, it's risk reward. There's no free lunch.

[quote]OP was talking about a Credit Union, not a bank.

FDIC does not insure Credit Unions.
 
^^^^^^^^^^^
You are correct. Missed the cute CU acronnym that ORC uses. Thanks for pointing that out.