Dedicated to Deposits: Deals, Data, and Discussion

ING Direct's 5.25% 12-Month / 5.00% 9-Month CD


ING Direct increased the APY on their short term CDs by 0.25% today. The 12-month CD now pays a competitive 5.25% APY which is only 0.05% under the 1-year CD leaders like Corus Bank and GMAC Bank. However, ING decreased the rate on their long term CDs by 0.25%. All CDs with terms over 24 months now only pay 4.75% APY.

This is the first time I've seen CD yields this inverted where the a 1-year CD pays 0.50% more interest than a 5-year CD. My guess is that the lower long term CD rates are to compensate for the higher short term rates, and the higher short term rates are an attempt to keep deposits after the Winter Save Up Sale. The drop from 4.75% to 4.00% in the savings account was a big drop. I'm sure most people who moved their money back into ING during the Save Up Sale have now been moving it back out.

ING Direct's CDs now are better deals than what EmigrantDirect offers. EmigrantDirect CDs are only at 5% APY for terms of 9 months and longer. In addition, ING Direct has the added benefit of having no minimum deposit requirements.

Below are the new CD rates along with the previous rates. Refer to this post for the history on their last CD rate change.

Term Old APY New APY Change
6 Month 4.50% 4.75% +0.25%
9 Month 4.75% 5.00% +0.25%
12 Month 5.00% 5.25% +0.25%
18 Month 5.00% 5.00%
24 Month 5.00% 5.00%
30 Month 5.00% 4.75% -0.25%
36 Month 5.00% 4.75% -0.25%
48 Month 5.00% 4.75% -0.25%
60 Month 5.00% 4.75% -0.25%

Orange Certificate of Deposit Details and Tips:

The penalty for early withdrawal is 3 months of interest for CD terms of 12 months and less. For CD terms over 12 months, the penalty is 6 months of interest. Note that if you redeem a CD a month after it's opened, you still have to pay the full 3 or 6 months of interest penalty.

For those considering an ING Direct CD, I would recommend first opening an ING Direct savings account. This makes funding CDs very quick and easy. No additional personal info needs to be entered. You just enter the term, the amount and the funding source. Another perk with the savings account is the $25 signup bonus (see post).

After opening a CD, ING Direct will send you a letter confirming the CD in the mail. Also, they will send you a letter informing you when a CD is about to mature. When you want to close the CD, you can just have it deposited into your savings account.

Since the CD opening process is so easy and there are no minimum requirements, it makes sense to open multiple CDs rather than just one. This way if you need some money before maturity, you can just break one of the CDs for the money you need. You would only be charged for interest penalty on that one CD.

When funding CDs with your savings account, remember not to go above your 6 withdrawal per month limit on your savings account. Although ING Direct doesn't charge a fee when this occurs, they may close your account if it happens too often. In addition to funding CDs from your ING savings account, you can also fund CDs from your linked checking accounts.

For the official details on the ING Direct CDs, refer to this ING Direct FAQ page.

An Old Low Interest Rate Certificate of Deposit:

If you invested in a long term CD from ING Direct or elsewhere a couple of years ago, you may find that the interest rate from that CD is much lower than what's available now. For example, two years ago an ING Direct 5-year CD may have only had an APY of 3.5%. With the current 1-year 5.25% APY CD, it will be worthwhile to close the old CD early and take the interest penalty. Assuming that you'll be able to make at least 5.25% after the one year, you'll come out with at least $360 ahead by breaking a $10K 5-year CD that was opened 2 years ago (assuming a 6 month penalty). Refer to my Bank CD Tool to calculate your own specific case.

Comment #1 by Anonymous posted on
ING Savings is now 4.15%
Every time I think of leaving them, they throw me a crumb like this. I guess I stay because I don't like moving my money around willy-nilly when there's no guarantee that any bank will maintain the highest rate.

Comment #2 by Banking Guy (anonymous) posted on
Banking Guy
Thanks for posting this rate update. I have to admit ING's site is convenient and it's better than staying at a 1% brick-and-morter savings account.

Comment #3 by Banking Guy (anonymous) posted on
Banking Guy
On May 20, 2006, all of ING's CDs with terms of 18 months and over had a bump-up in rates of 0.25%.