CD rates am I right here?

Russ Smith

The Original Whizzinator
Supporting Member
Joined
May 14, 2002
Posts
78,429
Reaction score
25,373
I have a 12 month CD with Capital One that renewed in Dec at .2 interest (-: You have 10 days from when it renews to cash out without penalty I wasn't paying attention so I missed that, the current money market is paying .5 at the time it renewed the money market was paying .3.

Right now their 1 year CD rate is 1.75 and they have an 18 month for 2.5. The penalty for early withdrawal is 3 months interest, which is something like 30 dollars total, just under 10 bucks a month. I've made about 53 bucks this year in 6 months. In 6 months at 2.75 I'd make about 688 dollars as compared to another 53 something if I leave it. It's a no brainer to cash out early and take the penalty right?

So the next question is do I put it in the 18 month at 2.5 or the 12 month at 1.75? In 1 year there's about 415 dollars more in interest if I do the 2.5 but with the fed increasing rates there's a reasonable chance that CD rates go higher and it will be better to renew in 12 months than 18 months because in 12 months the rate will be better than 2.5?

And along those same lines, is it also possible just waiting 6 months I'll end up at a better rate that beats cashing out now?
 

Folster

ASFN Icon
Banned from P+R
Joined
Jun 23, 2005
Posts
15,011
Reaction score
4,813
Your first question is a no-brainer as you said. Pay the penalty on that 0.20% CD.

The other questions are dependent on what interest rates do and that is an unknown. I think your solution would be to construct a ladder of CDs. For example: Divide the total amount by 4 and put 1/4 in 6, 12, 18, and 24 month maturities. You can construct it how you please. You will basically hedge your bets. If rates go up, you have a CD maturing every 6 months to get the new higher rate and you could buy another 2 year to add a rung to the ladder. If rates drop you still have longer term CDs at higher rates and they will mature every 6 months giving you flexibility.

Also keep in mind that inflation is over 8%. So the rates you are talking about are certainly better than zero or the recent negative market returns, but aren't keeping up with inflation.

Take a look at I bonds. I believe they are paying 9.62% currently, but interest is variable and the rate is recalculated every 6 months. They have a 5 year holding period, but just a 3 month penalty for cashing out prematurely. You are limited to 10K a year though.
 

Yuma

Working from home. Missing my free coffee!
Joined
Jan 3, 2003
Posts
14,067
Reaction score
3,084
Location
Laveen, AZ
Your first question is a no-brainer as you said. Pay the penalty on that 0.20% CD.

The other questions are dependent on what interest rates do and that is an unknown. I think your solution would be to construct a ladder of CDs. For example: Divide the total amount by 4 and put 1/4 in 6, 12, 18, and 24 month maturities. You can construct it how you please. You will basically hedge your bets. If rates go up, you have a CD maturing every 6 months to get the new higher rate and you could buy another 2 year to add a rung to the ladder. If rates drop you still have longer term CDs at higher rates and they will mature every 6 months giving you flexibility.

Also keep in mind that inflation is over 8%. So the rates you are talking about are certainly better than zero or the recent negative market returns, but aren't keeping up with inflation.

Take a look at I bonds. I believe they are paying 9.62% currently, but interest is variable and the rate is recalculated every 6 months. They have a 5 year holding period, but just a 3 month penalty for cashing out prematurely. You are limited to 10K a year though.
Ditto on I bonds. There's some REITs that lost value on price during this market, which actually boosts their percentage rate if you can take more risk.
 
OP
OP
Russ Smith

Russ Smith

The Original Whizzinator
Supporting Member
Joined
May 14, 2002
Posts
78,429
Reaction score
25,373
Your first question is a no-brainer as you said. Pay the penalty on that 0.20% CD.

The other questions are dependent on what interest rates do and that is an unknown. I think your solution would be to construct a ladder of CDs. For example: Divide the total amount by 4 and put 1/4 in 6, 12, 18, and 24 month maturities. You can construct it how you please. You will basically hedge your bets. If rates go up, you have a CD maturing every 6 months to get the new higher rate and you could buy another 2 year to add a rung to the ladder. If rates drop you still have longer term CDs at higher rates and they will mature every 6 months giving you flexibility.

Also keep in mind that inflation is over 8%. So the rates you are talking about are certainly better than zero or the recent negative market returns, but aren't keeping up with inflation.

Take a look at I bonds. I believe they are paying 9.62% currently, but interest is variable and the rate is recalculated every 6 months. They have a 5 year holding period, but just a 3 month penalty for cashing out prematurely. You are limited to 10K a year though.

Yeah this is over 50K and this is very much a safety fallback thing I honestly don't even want to tie it up for 18 months, I always do 12 months but at this point just seems no brainer to take the penalty.
 

Mainstreet

Cruisin' Mainstreet
Supporting Member
Joined
Oct 19, 2003
Posts
96,799
Reaction score
35,265
@Russ Smith

Are you dealing with the Capital One credit card company? There is also a Capital One bank. There seems to be a difference.
 
OP
OP
Russ Smith

Russ Smith

The Original Whizzinator
Supporting Member
Joined
May 14, 2002
Posts
78,429
Reaction score
25,373
@Russ Smith

Are you dealing with the Capital One credit card company? There is also a Capital One bank. There seems to be a difference.

Same company I have both the credit card and the bank for the CD and money market fund
 

Mainstreet

Cruisin' Mainstreet
Supporting Member
Joined
Oct 19, 2003
Posts
96,799
Reaction score
35,265

Yuma

Working from home. Missing my free coffee!
Joined
Jan 3, 2003
Posts
14,067
Reaction score
3,084
Location
Laveen, AZ
I remember back in the seventies when I was a kid, a lot of retirees loved the high inflation. I used to golf and hung out with older people a lot. Many were Canadians. They would all talk about their high CD rates, etc. I remember after early eighties when things went back to normal, they were bemoaning the low interest rates on their funds.
 
OP
OP
Russ Smith

Russ Smith

The Original Whizzinator
Supporting Member
Joined
May 14, 2002
Posts
78,429
Reaction score
25,373

Yuma

Working from home. Missing my free coffee!
Joined
Jan 3, 2003
Posts
14,067
Reaction score
3,084
Location
Laveen, AZ
Looks like the same link yes mine says 360 Money Market currently paying .5
I got out of my savings that was this rate. I realized at that rate there was no way I was even keeping up with inflation. I would rather buy stocks at the low rate they are now and hopefully bank on them blowing up later and giving me double digit appreciation. I mean, .5 is almost zero.
 

Mainstreet

Cruisin' Mainstreet
Supporting Member
Joined
Oct 19, 2003
Posts
96,799
Reaction score
35,265
Looks like the same link yes mine says 360 Money Market currently paying .5

Thanks. I see everything but the money market listed and I've checked out various categories. Maybe it's called "performance savings?"

Anyway, thanks for your interest.
 
OP
OP
Russ Smith

Russ Smith

The Original Whizzinator
Supporting Member
Joined
May 14, 2002
Posts
78,429
Reaction score
25,373
I got out of my savings that was this rate. I realized at that rate there was no way I was even keeping up with inflation. I would rather buy stocks at the low rate they are now and hopefully bank on them blowing up later and giving me double digit appreciation. I mean, .5 is almost zero.

Yeah this is money market this is literally if something drastic happens and I need cash quickly I have some. The CD is the one getting .2 and it's just so that I'm not 100% in the market.

I do agree that it won't keep up with inflation
 
OP
OP
Russ Smith

Russ Smith

The Original Whizzinator
Supporting Member
Joined
May 14, 2002
Posts
78,429
Reaction score
25,373
I finally acted here today. Capital One confirmed I can't do it online so I had to call, then they closed my CD and transferred the funds to my money market and then said I can now go online and open a new CD. My penalty was 26.28 so not bad.

The current money market is paying .7, I was getting .2 so I get 3 1/2 times what I was getting in the CD so in theory in six weeks it will pay for the penalty.

Since my original post the CD rate has gone from 1.75 to 1.9. With a rate hike coming soon I may just wait and see if I can get it over 2. Still sucks I know but the .2 thing was just awful.
 
OP
OP
Russ Smith

Russ Smith

The Original Whizzinator
Supporting Member
Joined
May 14, 2002
Posts
78,429
Reaction score
25,373
Your first question is a no-brainer as you said. Pay the penalty on that 0.20% CD.

The other questions are dependent on what interest rates do and that is an unknown. I think your solution would be to construct a ladder of CDs. For example: Divide the total amount by 4 and put 1/4 in 6, 12, 18, and 24 month maturities. You can construct it how you please. You will basically hedge your bets. If rates go up, you have a CD maturing every 6 months to get the new higher rate and you could buy another 2 year to add a rung to the ladder. If rates drop you still have longer term CDs at higher rates and they will mature every 6 months giving you flexibility.

Also keep in mind that inflation is over 8%. So the rates you are talking about are certainly better than zero or the recent negative market returns, but aren't keeping up with inflation.

Take a look at I bonds. I believe they are paying 9.62% currently, but interest is variable and the rate is recalculated every 6 months. They have a 5 year holding period, but just a 3 month penalty for cashing out prematurely. You are limited to 10K a year though.

FYI I was reading about I bonds last night. So to be clear the first 6 months is 9.62 and then it recalculates based on CPI correct? So if inflation drops then the rate drops? You can't sell for 5 years without penalty, 3 months loss of interest. And the max is 10K?

So you get a guarantee of half of 962 in interest on 10k and then whatever the rate is the next 6 months?

I still have just over half the money I took out of the CD, I put almost half in at 2.5 for 18 months.
 

Folster

ASFN Icon
Banned from P+R
Joined
Jun 23, 2005
Posts
15,011
Reaction score
4,813
FYI I was reading about I bonds last night. So to be clear the first 6 months is 9.62 and then it recalculates based on CPI correct? So if inflation drops then the rate drops? You can't sell for 5 years without penalty, 3 months loss of interest. And the max is 10K?

So you get a guarantee of half of 962 in interest on 10k and then whatever the rate is the next 6 months?

I still have just over half the money I took out of the CD, I put almost half in at 2.5 for 18 months.

Everything you wrote looks right, but I have not reviewed all of the terms with a fine toothed comb. I wouldn't imagine there isn't any funny business. It does look like the minimum holding period is 1 year. 3 months penalty if cashed out between years 2-5.
 
OP
OP
Russ Smith

Russ Smith

The Original Whizzinator
Supporting Member
Joined
May 14, 2002
Posts
78,429
Reaction score
25,373
Thanks. I see everything but the money market listed and I've checked out various categories. Maybe it's called "performance savings?"

Anyway, thanks for your interest.

So I finally had time to look into this yesterday and discovered what's going on and boy do I feel stupid for not doing it sooner. You are in fact correct Capital One no longer offers money markets, at least not NEW ones. If you already had one, they kept it but the rates are low. Mine was paying .8. I finally called and asked because there's a 360 Performance Savings account that is paying 2 percent. They're not identical to Money Market but close enough that it makes absolutely no sense to not be in the Performance Savings not the Money market.

So I transferred most of my Money Market into a new Performance savings last night. Kicking myself for not following up earlier when we had this discussion because it was this discussion that prompted me to be wondering why their MM was paying so low and the answer is they WANT you to close it and go into the Performance Savings.

I kept the MM open with a small amount.

So I sort of have a CD ladder like Folster was suggesting but it's a combination of 2 CD's, a Performance Savings and a Money Market. Their CD rate is up to 2.75 now and will likely go higher soon with the fed raising rates.

I actually tried to do the I Bonds but the low limit and the website that appears to have been designed ages ago eventually convinced me to give up.

I'm still mostly in the market but if as it appears rates are going to be high for awhile I figure it makes sense to have some money in the higher yield safe vehicles like CD's.
 
OP
OP
Russ Smith

Russ Smith

The Original Whizzinator
Supporting Member
Joined
May 14, 2002
Posts
78,429
Reaction score
25,373
How 'bout 2 Year Treasuries? They're paying more than 4%.

I'm trying to keep things 1 year or less although I do have an 18 month CD that is not up until Jan 24.

I just found out Monday that my company is closing my site, 11/17 is supposed to be my last day. Not sure yet if I'm going to look for another job or attempt to retire but I want to have money that I can easily access without early term fees etc.

So the MM and the Savings with Capital One are perfect for that.
 

Mainstreet

Cruisin' Mainstreet
Supporting Member
Joined
Oct 19, 2003
Posts
96,799
Reaction score
35,265
So I finally had time to look into this yesterday and discovered what's going on and boy do I feel stupid for not doing it sooner. You are in fact correct Capital One no longer offers money markets, at least not NEW ones. If you already had one, they kept it but the rates are low. Mine was paying .8. I finally called and asked because there's a 360 Performance Savings account that is paying 2 percent. They're not identical to Money Market but close enough that it makes absolutely no sense to not be in the Performance Savings not the Money market.

So I transferred most of my Money Market into a new Performance savings last night. Kicking myself for not following up earlier when we had this discussion because it was this discussion that prompted me to be wondering why their MM was paying so low and the answer is they WANT you to close it and go into the Performance Savings.

I kept the MM open with a small amount.

So I sort of have a CD ladder like Folster was suggesting but it's a combination of 2 CD's, a Performance Savings and a Money Market. Their CD rate is up to 2.75 now and will likely go higher soon with the fed raising rates.

I actually tried to do the I Bonds but the low limit and the website that appears to have been designed ages ago eventually convinced me to give up.

I'm still mostly in the market but if as it appears rates are going to be high for awhile I figure it makes sense to have some money in the higher yield safe vehicles like CD's.

It's ironic you wrote me about this because I was thinking about contacting you about CDs.

Yeah, I never could find out anything about their money market funds when we talked awhile back.

I'm looking at putting some money into Capital One "360 CDs." The rates should be over 3% soon. Below is the link I'm watching.

If you don't mind, I might PM you with a couple of questions later on.

 
OP
OP
Russ Smith

Russ Smith

The Original Whizzinator
Supporting Member
Joined
May 14, 2002
Posts
78,429
Reaction score
25,373
It's ironic you wrote me about this because I was thinking about contacting you about CDs.

Yeah, I never could find out anything about their money market funds when we talked awhile back.

I'm looking at putting some money into Capital One "360 CDs." The rates should be over 3% soon. Below is the link I'm watching.

If you don't mind, I might PM you with a couple of questions later on.

2.75 is the highest for 1 year right now I just checked today. But with the rate hike I would imagine 2.85 will be the next jump?

Feel free to PM me. I have a 18 month at 2.5 and a 12 month at 2.25 so the 12 has gone from 2.25 to 2.75 recently.
 

Mainstreet

Cruisin' Mainstreet
Supporting Member
Joined
Oct 19, 2003
Posts
96,799
Reaction score
35,265
2.75 is the highest for 1 year right now I just checked today. But with the rate hike I would imagine 2.85 will be the next jump?

Feel free to PM me. I have a 18 month at 2.5 and a 12 month at 2.25 so the 12 has gone from 2.25 to 2.75 recently.

Thanks. I will send you a PM later.

The way internet bank rates have been jumping, I suspect it will go to 3% or higher soon.
 
OP
OP
Russ Smith

Russ Smith

The Original Whizzinator
Supporting Member
Joined
May 14, 2002
Posts
78,429
Reaction score
25,373
Thanks. I will send you a PM later.

The way internet bank rates have been jumping, I suspect it will go to 3% or higher soon.

Capital one is a good mix of reliable and good rates but the smaller banks always have higher CD rates. There are banks right now, CFG Bank is 3.05 for 12 months, Bread Savings 3, but for banks you've heard of Capital One is about as high as I've seen.

But yeah it will go higher I just doubt they jump .25 quickly it will probably take a bit to go up that high
 

Folster

ASFN Icon
Banned from P+R
Joined
Jun 23, 2005
Posts
15,011
Reaction score
4,813
Thanks. I will send you a PM later.

The way internet bank rates have been jumping, I suspect it will go to 3% or higher soon.

The one year treasury is over 4% now. You should be able to get brokered CDs next week for near that.

A quick google and I found Vanguard is listing the current rates. They should be the same at all brokers as they are just offerings from national banks.

You must be registered for see images attach
 

Mainstreet

Cruisin' Mainstreet
Supporting Member
Joined
Oct 19, 2003
Posts
96,799
Reaction score
35,265
The one year treasury is over 4% now. You should be able to get brokered CDs next week for near that.

A quick google and I found Vanguard is listing the current rates. They should be the same at all brokers as they are just offerings from national banks.

You must be registered for see images attach

I do not have a clue how to get a brokered CD.

My present bank only wants to pay me slightly over 1% on a CD which is not terrible for some brick and mortar banks.
 

Mainstreet

Cruisin' Mainstreet
Supporting Member
Joined
Oct 19, 2003
Posts
96,799
Reaction score
35,265
Capital one is a good mix of reliable and good rates but the smaller banks always have higher CD rates. There are banks right now, CFG Bank is 3.05 for 12 months, Bread Savings 3, but for banks you've heard of Capital One is about as high as I've seen.

But yeah it will go higher I just doubt they jump .25 quickly it will probably take a bit to go up that high

I've been following Capital One closely, but I've been reluctant to make the jump because it's scary to give one's money to a computer link.

At least I have a Capital One credit card, so that's something.
 

Forum statistics

Threads
492,641
Posts
4,892,200
Members
6,172
Latest member
ccw24
Top