About Ken Tumin

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.

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CDs or Savings Accounts in Today's Low-Rate Environment?


CDs or Savings Accounts in Today's Low-Rate Environment?

With CD rates so low these days, is it better to keep more of your money in savings accounts? I'm sure many savers have long-term CDs that are maturing. Those long-term CDs probably had rates over 4 percent. Now it's difficult to find CDs with 2 percent rates. Instead of opening a new long-term CD, another alternative is to just move that money into a savings or money market account. With some effort, you can get rates that aren't much lower than the long-term CD rates.

Savings and Money Market Accounts

One strategy is to stick with internet savings and money market accounts. To get the best rates you will probably have to move your money at least twice a year. By taking advantage of intro rates, new internet banks and promos from old banks, you can maximize your return. Last year I reviewed this strategy and its returns for the previous three years.

If you're going to try this strategy today, you might want to consider the 1.25% intro rates at EverBank and at Salem Five Direct. If you're no longer eligible for those intro rates, you can get 1.05% APY in money market accounts at four internet banks. You can also get 1.10% APY at AmericaNet Bank and its two sister banks, but this is limited to a $35K balance.

Savings Accounts Plus Short-Term CD Deals

One advantage of keeping your money in savings and money market accounts is that it makes it easy to take advantage of CD deals that pop up. Those CD deals can boost your returns without giving up too much liquidity. A good example of this was the 1.50% 8-month CD special that DCU offered last year (no longer available). The best CD deal today is at PenFed which is offering a 1.25% APY 1-year CD, a 1.60% APY 2-year CD and a 1.85% APY 3-year CD (as of 1/21/2013)

Reward Checking Accounts

Over the last five years, reward checking accounts have allowed savers to earn more than they could earn with internet savings accounts. It has required more work. The toughest has been the required monthly debit card purchases. Also, the balance caps have made it difficult for those with large savings. Last year I reviewed how much extra interest you could earn with reward checking accounts over the last three years. Like internet savings accounts, maximizing returns requires moving to new rate leaders at least once a year.

If you're lucky, you'll have some good local reward checking deals. You can find reward checking accounts available in your state by using our reward checking table. You can also use the table to find reward checking accounts available nationwide. Refer to this post to learn how to use the table. If you're new to reward checking accounts, please refer to my post 10 Common Traits of High-Yield Reward Checking Accounts.

Other Strategies

For money that you want to keep in banks and credit unions, another strategy is choosing long-term CDs with mild early withdrawal penalties. Some institutions to consider for this strategy include Ally Bank, Barclays, Discover Bank and PenFed. As we have discussed many times, there are risks with using this strategy. There's a possibility that a bank will refuse an early withdrawal request, and it's possible that a bank will raise the penalty for an early withdrawal. My last review of these risks was in my report of Ally Bank's disclosure change.

Finally, don't forget traditional CD ladders. Last year I reviewed CD ladders and asked if CD ladders still make sense. Several readers who have been investing in CDs for decades have said they have rarely if ever regretted going long on their CDs.

What strategies are using for your bank accounts to maximize your returns?

Related Pages: CD rates, savings account

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Ricochet   |     |   Comment #1
I have gotten real tired of chaseing CDs for an extra $200 a year.

Allys' no penalty .91% with a hopefully .25% bump puts it at a high of just $250 below a 2 year CD.

With large deposit renewals it makes more sence to me to just roll it over
Ricochet   |     |   Comment #2
That is , if you want to keep funds ready for a short term. Most of my CDs are out to 2015.

 Hoping something moves the rates by then.
Anonymous   |     |   Comment #3


Dear Ricochet - #2,

To use President Clinton's words - "I feel your pain". -)

One of the possible solutions (which may not be for everyone to implement) is to buy a Structured CD that is tied negatively to LIBOR.  If the LIBOR stays down (which is to be expected in the present low interest environment) then the interest earned is higher.

Sevaral pitfalls exist in the tactic of course. Some of them are (a) The interest rate, and LIBOR may rise very rapidly effectively diminishing the return of such a Structured CD (b) Structured CD may get called (c) Only the principal is FDIC insured, the interest is not.  (d) The CD may return 0 interest. (e) As we know LIBOR was 'manupulated' in the past, so it may be manupulated again (!) affecting the interest.

Yours Truly,
- Anonymous
Robert   |     |   Comment #4
If you have < $10,000 / year to save; and if you can withstand having your money tied up for a year; you might also consider I-Bonds.  Their rates are still above savings and most CD's
PabloSavin   |     |   Comment #5
Yes, it is I, Pablo Savin. I am still doing a CD ladder and have cut much fat from my daily expenses. My plan is still go as long as possible with new CD's. But I am also putting more money into the CD's every time I buy a new one. Maybe like ten percent more. If and when the rates go up I will have more money to invest. I would rather save a higher percentage than hope for a higher return, getting burned in the market will do that to you. My ladder is at twenty two CD's right now, coming due between this month and 2021.
RJM   |     |   Comment #6
I have some CDs laddered but far too much earning very little.  Ive been investing in stocks for a long time but in recent years, Ive continued to have a number of situations with end games and so Ive been cashed out and have been unable or unwilling to reinvest that money back in other stocks like I used to when I had regular income.

But really, with rates this low, stocks sure seem to be a better value.

Lots of stocks have dividend yields well above savings account & CD rates and you have upside but also downside potential.

I was a better investor when I was more willing to take risks. But, since my outside income has ceased, Im unwilling to take those risks.

But, I SHOULD have more invested in stocks.

Anonymous   |     |   Comment #7


Dear Readers,

Here are the CUSIPs for two of the Structured CDs that are tied invesrly to LIBOR.  CUSIP# 48124JRS9 and CUSIP# 172986GA3. One of the CDs is by Chase and the other by Citi. As mentioned before, there are certain risks associated with Structured CDs, that are not there for Traditional CDs.  The common thing between Structured and Traditional CDs is that the principal is insured by the FDIC.

Yours Truly,
- Anonymous
Anonymous   |     |   Comment #8


Dear RJM - #6,

>> But, I SHOULD have more invested in stocks.

Perhaps it is much better to be "out" wishing that you were "in", rather than being "in" wishing that you were "out".  :-)

Yours Truly,
- Anonymous

Anonymous   |     |   Comment #12
#8............I disagree. I think it is much better to be doing the in & out, & in & out, & in & out........................than to be either permanently in or permanently out! :) 
Anonymous   |     |   Comment #10
to heck with the grammer and spelling freaks, if precise language is needed to avoid confusion, sure.

this is an informal atmosphere, and most can even read that confounded txt message slang.  :)
Betsy   |     |   Comment #11
To #6 RE: Dividend-Yielding Stocks:

One small drop in a stock price wipes out a year's worth of dividends, could happen in one day.  I've had that happen to me more than I care to mention.  I'd rather go with the 1.75%-2.00% long-term CD's and Israeli Bonds paying well over 3.00% semi-annually.  At least the principal is not at risk, IMHO.
Anonymous   |     |   Comment #13
Market timing is for losers. 

Being retired, I do as Betsy #11 posted, accept no Israeli bonds for me.  I have also learned from past experience that one day's market decline can wipe out one year's dividends gain, and then some.  In retirement, steep market loses can take more than just a financial tole on a person and one's family.  That is why Ken's site for the best CD and Savings rates is such a valuable resource for many retirees like myself.
Anonymous   |     |   Comment #14


Dear Anonymous - #13,

What if I write:  "Certificates/CDs are for losers!"  ... Surely you would disgree, won't you?  Perhaps you'd ask what did they lose? ... Their principal and interest was never ever lost, so did they lose anything at all?  ... Ever?

... The truth is that the market timing is for those who have the necessary skill, tactic/strategy, and logic.  We know that there are some market timers/trades who have made a great deal of money.  Jack D. Schwager has written two books interviewing a few market wizards and a few new market wizards.



And Michael Lewis has written about a few folks who actually profited when the markets crashed in 2007/2008.


Therefore, an unqualified statement like "Market timing is for losers" simply is not true!

There are a few famous (as given above) market-timers and some not so famous who do market timing and win!  In the beginning I posed question about what did the folks lose when they invested in Certificates/CDs.  Answer to this is they potentially lost the "opportunity" to make more money!

I know ... I know ... not everyone has the skill, tactic/strategy, and logic to do market timing to generate profits.  But there are some who do this, and generate profits higher than what can be obtained by Certificates/CDs.

>> That is why Ken's site for the best CD and Savings rates is such
>> a valuable resource for many retirees like myself.

Right ... Now that is something that I'd agree with.  You know your situation/skill, and if you've decided that within the limitations you have, you should limit yourself to Certificates/CDs only then that is perfectly fine.


Yours Truly,
- Anonymous
Anonymous   |     |   Comment #16


Dear Anonymous - #15,

Indeed.  :-))

If one has the inclination and skill in investing/trading/timing, err ... and whatever else :-), and one understands and accepts the risks of such ... err activities (!) ... then there are some rewards/pleasures to be had for those with skills!

Yours Truly,
- Anonymous
Anonymous   |     |   Comment #17
................but rather a crude play on words in reference to the ****ual act, that apparently no one got, I suspect. 


Maybe they did and considered it a Skank post, which didnt deserve recognition
Anonymous   |     |   Comment #24
Where are the "grammer" and spelling freaks ? It's "grammar" - that's funny.