One of my CDs in my CD ladder initiative just matured, so I figure its a good time to give a update . If you recall from my previous post, my CD ladder is a little bit more complicated given the current interest rates. If anything I think it looks more like a slinky (I might be dating myself here). My approach is simply having 2 CD ladders, a short term one and a long term one at the same time. I wouldn’t want to confine myself to all long term yet, I want to make sure that a cycle is in place and that at least 1 CD is maturing every quarter.
As of right now, I have a total of 7 CDs, 4 of which are 1-year CDs and 3 of them are 4- and 5-year CDs from Ally Bank. All of my 1 year term CDs are all set to mature one quarter after another within the next year. The 3 longer terms are set to return one after one another as well. I want to reemphasize that the only reason that I have so many annual CDs is because I don’t want to lock myself into all 5 year CDs with such a low rate. So I have a shorter CD ladder going on as well as a long term one, making my catch reserves a little more liquid. Of course with the ways things are looking now CD rates will hardly go back to what it used to any time soon.
Ally is fairly painless with the CD maturity. They have a relatively lower penalty rate (6 months of interest from early withdrawal.) You can refer to Jonathan’s post from MyMoneyBlog on his analysis of why Ally is a good choice for long term CDs. They’ll send you paper mail to remind you when your CD matures and you have the same 10-day grace period before they automatically enroll you into a new CD with the same term. All interests are deposited at the end of the term and since I bank with them, I can just transfer my money out.
I’ve also had a CD at Discover and HSBC before, but their early withdrawal penalty is rather high, making you not want to risk withdrawing early. Plus Ally Bank is also running a promotion where if you rollover any maturing CDs into another term, they’ll automatically give you an additional 0.25% rate as a loyalty benefit. That means, if you have a CD maturing from now till June 30, 2013, and you roll into a new 5-year term, for example, you’ll get the current rate at 1.54% + 0.25% = 1.79%! That’s the highest 5 year CD rate I can find right now.
Anybody else setting up CD ladders? What do you do with your cash with saving account interests so low now?