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Ken Tumin founded the Bank Deals Blog in 2005 and has been passionately covering the best deposit deals ever since. He is frequently referenced by The New York Times, The Wall Street Journal, and other publications as a top expert, but he is first and foremost a fellow deal seeker and member of the wonderful community of savers that frequents DepositAccounts.

Featured 2-Year CD Rates

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Featured Accounts
DETAILSINSTITUTIONAPYMINMAXPRODUCT
Ally Bank1.60%--High Yield 5 Year CD
Consumers Credit Union (IL)1.05%$100k-59 Month Jumbo CD
Ally Bank0.87%--No Penalty 11-Month CD
Accounts mentioned in this post. Rates as of April 16, 2014

Comparing CDs Based on Rates and Early Withdrawal Penalties

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If you're looking for a short-term CD with maturities under 1 year, make sure you include Ally Bank CDs in your comparison. For very short-term CDs, it's hard to beat Ally Bank's 11-month no-penalty CD. This CD rate actually went up last week. The rate is 1.14% APY as of 6/7/2011 (up from 1.10% last week). In today's low rate environment, it's very hard to find any CD with terms under 6 months and yields over 1.00%. With this no-penalty CD, you can make it into any term that you want from one week to 11 months.

Ally Bank's 5-year CD

For longer terms, Ally Bank's 5-year CD becomes the best deal. This has a very mild early withdrawal penalty of 60 days of interest. The rate is 2.39% APY as of 6/7/2011. It doesn't take too many months before this 5-year CD becomes a better deal than the 11-month no-penalty CD. If you close this 5-year CD after 4 months, you'll lose 2 months of interest or half of the interest. That essentially cuts the 2.39% APY by half resulting in a rate of about 1.19%.

Consumers Credit Union's 59-month CD

Last week I wrote about another nationally available CD with both a competitive rate and a mild early withdrawal penalty. It's at Consumers Credit Union, and the CD has a 59-month term with a 2.75% APY for a $100K minimum deposit (2.50% APY for a $250 minimum) as of 6/7/2011. The early withdrawal penalty is 120 days of interest. This is twice the amount of Ally's penalty, but it's still mild compared to other banks and credit unions which have penalties of 6 to 12 months.

Long-Term CD Risks

There are some potential risks of long-term CDs that I discussed in this November blog post. One risk is that the bank increases the early withdrawal penalty on existing CDs. This recently happened at Fort Knox FCU. The NCUA Consumer Compliance Analyst has been investigating this issue at Fort Knox FCU, and the issue is currently in the final review process. For Ally Bank, I've received an assurance from Ally's public relations director that the penalty would not be increased on existing CDs.

Comparing These CDs

The table below shows how these 3 CDs compare. Ally Bank's 11-month CD is the best for a 3-month term. For the longer terms, Ally Bank 5-year CD and Consumer Credit Union's 59-month CDs are close. After two years, Consumers Credit Union's CD becomes a better deal.

The early withdrawal yields listed below are based on the spreadsheet developed by Bogleheads forum members. It's available from the Bogleheads Wiki: Comparing CDs. It should be noted that the following simple formula comes very close to this spreadsheet:

Post Penalty APY = (Full APY) x (D - P) / D

D = days into term when the CD was closed.
P = days of the early withdrawal penalty

These CD rates are based on the rates listed at the institutions' websites as of 6/7/2011:

Approximate Yields After Early Withdrawal Penalties

Year of Early Withdrawal Ally's 11-mo 1.14% CD Ally's 5-yr 2.39% CD Consumers CU 59-mo 2.75% CD
Early Withdrawal Penalty 0 months 2 months 4 months
month 3 1.14% 0.79% -0.90%
month 6 1.14% 1.59% 0.91%
month 9 1.14% 1.85% 1.52%
year 1 n/a 1.99% 1.83%
year 2 n/a 2.19% 2.29%
year 3 n/a 2.26% 2.44%
year 4 n/a 2.29% 2.52%
year 5 n/a 2.39% (no penalty) 2.75% (59mo/no penalty)

More details about these CDs and the early withdrawal penalties are listed in the account disclosures. Ally Bank's account disclosure is available here, and Consumers Credit Union account disclosure is available here (below the rate sheet).

Searching for Top CD Rates

To search for nationwide CD rates and CD rates in your state, please refer to the best CD rates section of DepositAccounts.com.

  Tags: Ally Bank, Consumers Credit Union (IL), CD rates

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Comments
2 comments.
Comment #1 by evelyn (anonymous) posted on
evelyn
I read your blog every day and you have taught me so much!  Because of what I've learned here, I've recently opened up an Ally savings account and also opened several Ally 5-year CDs.  I also opened an HSA, something I should have done years ago, but never really understood the concept until reading your blog.  You have a wonderful way of clearly explaining financial matters to people like me who are new to savings and investing.  Thank you so very much for helping me get my financial life in order.  

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Comment #2 by Anonymous posted on
Anonymous
The decision regarding how far out to go is unavoidably linked to politics.  And it's not just our current disasterous POTUS dilemma.  It's also the Chairman of the Federal Reserve.  Many focus on 2012.  But the truth is no measurable relief can be anticipated before 2013.  And even if there is change at the top,  I question the ability of anyone to put things right quickly.  So the timing reality, if remediation comes at all, is more likely to be 2014.  Meanwhile, we are in a hole and we will remain in that hole. 

2