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Americans Opting For Liquid Bank Accounts Over CDs

Saturday, September 11, 2010 - 12:52 PM
From AP via
People are bailing out of bank certificates of deposit and parking their cash in checking and savings accounts that earn little or no interest but also don’t exact penalties for early withdrawal.

This makes sense to me. I don't see much benefit going with short-term CDs over online savings accounts or reward checking accounts. Even if the savings account rates fall, you are not going to make much more with a 6-month or 1-year CD.

For example, a 1.25% 6-month CD with a $10K deposit will only pay around $62 of interest. If you chose an internet savings account that started at 1.30% and fell to 1.00%, by the end of the 6 months, your total interest will be around $57. That's not enough spread to make the CD worthwhile for me.

When is a 6-month CD worthwhile for you?
Ken TuminKen Tumin5,471 posts since
Nov 29, 2009
Rep Points: 125,634
1. Saturday, September 11, 2010 - 1:36 PM
Uh, try: never!
darkdreamer4udarkdreamer4u178 posts since
Jun 11, 2010
Rep Points: 638
2. Saturday, September 11, 2010 - 4:19 PM
In rising rate environments (remember when?) IF >3x the projected increase over term vs mm savings. As rates decline utility approaches zero.  Graphical illustration

I wonder what deposit distribution banks experience at 3-6 month terms vs MMA in normal vs current conditions? A future content research project, Ken.
CraigPDCraigPD94 posts since
Jun 12, 2010
Rep Points: 336
3. Saturday, September 11, 2010 - 9:14 PM
For the last 32 years I have purchased the highest rate CD for the longest term I could find.  I will continue to do it. I add to each CD as it matures if we are able to. If we have extra funds  and no CD will mature with a few weeks I purchase another CD.  Just purchased a 3.5% CD for 5 years and a few days ago and purchased a 3.9% 5 year CD about 3 months ago. Why have money sit around in a savings account making 1.45%. I figure I am losing 2% by letting it sit in a savings account. I have our emergency funds in one reward checking and our budgeted bill money in another reward checking account.
Ally6770Ally6770938 posts since
Jan 16, 2010
Rep Points: 2,728