I just received notice from Ally Bank that they will be changing the early withdrawal charges on their CDs. If you’ve followed any of my CD posts, you will see that I have created a CD ladder at Ally Bank. I chose Ally Bank because of it’s low early withdrawal fees, making long term 5 year CDs a little more “liquid” than other long term CDs. But unfortunately it looks like Ally Bank can’t keep those rates anymore and decided to increase the early withdrawal fees.
Here’s a breakdown of the new fee system: (taken from Ally website)
|All CD terms
||60 days of interest
|2 years or less
||60 days of interest
||90 days of interest
||120 days of interest
|5 years or longer
||150 days of interest
This means a 5 year CD can make you lose 5 months of interest! With a 5 year CD rate at 1.60% and high yield savings account at 0.86%, it might be more worth it to just keep a high yield savings account. With higher early withdrawal fees, my CD ladder seems to make even more sense to me now.
What is a CD Ladder?
The concept of a CD ladder is to help you plan out your CD investments so that you can continuously invest in CDs, maximizing your earnings and still provide some flexibility to your funds as to not constantly lock it down.
I’ve been trying to set up a CD ladder for myself. Interest rates have been in their all time low nowadays, even for CDs and high yield savings, but being that I’m not much an investor myself, I’ll like to take some action to bump up my savings as minimal as it may be.
To truly master the skill of CD laddering, you want to turn your CDs as liquid as possible. The ultimate goal is to have your CDs mature one after another so some of your funds are always available. Picture this: having 60 5-year CDs maturing every month of a 5 year period! But, of course, the average person will not have the funds/time/energy to sign up for 60 CDs, so depending on how large your savings are, you can decide on the interval of maturity whether monthly, quarterly, or annually.
How I Plan My CD Ladder
1. Decide on an maturity interval. You need to consider how often you want to have Continue reading