Should I Close A 1.5% CD Early?

RJM | Dec 22, 2017 | 499 posts since 2011

I found a calculator but it was only for current CD rates. Mine matures Mar 14, 2019 and it pays 1.5%.

Should I pay the 3 month penalty or not. Versus buying an 11 month no penalty?

I have never before been in this situation.

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Answers

bwk1954 | Dec 22, 2017 | 25 posts since 2011

Use this calculator:

https://www.depositaccounts.com/tools/break-cd-calculator.aspx

RJM | Dec 23, 2017 | 499 posts since 2011

Thanks. That was the calculator I couldn't find.
And, I got my answer...
YES! You should break the CD.
By breaking your existing CD and reinvesting your remaining balance into the new CD, you will have $35,961.24 at the end of 16 months (vs $35,860.87 if you do not break the CD).

Therefore, you will gain $100.37 if you break the CD.

Kaight | Dec 22, 2017 | 1,192 posts since 2011

I agree you should use the calculator, comparing your 1.5% CD against a specific alternative. That said:

My gut says you should close the CD, but with one wrinkle. Before doing that, approach your financial institution and inquire whether they might be willing to bump your interest rate up a bit. You will need to reach at least the supervisor level before making such an inquiry. Worst that can happen is they say "no", and then you do what you have to do and leave. But give them a chance. There is nothing to lose.

Ally6770 | Dec 22, 2017 | 4,293 posts since 2010

Or wait-- Rates may be up even more. But then again unemployment is way up for Michigan, Wisconsin and I think the third mentioned this morning was Ohio as well as others. So maybe they will not be raised again for awhile.

Kaight | Dec 22, 2017 | 1,192 posts since 2011

This is the internet. Data is available here to all willing to search. I searched:

"The Wisconsin Department of Workforce Development reported Thursday that the unemployment rate of 3.2 percent in November was down 0.2 percentage points from October." This from U.S. News

" Michigan's unemployment rate rose by one-tenth of a percentage point to 4.6 percent in November when the number of people in the state's workforce rose by 17,000." From WDIV. Since when can a sane person describe this as unemployment being "way up"?

"Ohio Unemployment Rate Drops in November. State officials say Ohio's unemployment rate dropped to 4.8 percent in November but remained higher than the national rate." From U.S. News

I have no way to know whether you created and purposefully posted the fake news you posted, or whether you instead heard and merely parroted fake news. There is a HUGE amount of fake news out there today.

I believe very little reported by the American MSM, but even I got caught with a head slapper just earlier today. They widely reported President Trump would not be signing tax reform until 2018. Believing the lie, I was disappointed. He signed the bill today. It is not yet 2018 AFAIK. Now I'm happy, but disappointed with myself because I believed bogus reports.

Ricochet | Dec 23, 2017 | 522 posts since 2010

Trump his self said he pulled it out of his arse at the last minute before leaving.
That 's not fake

RJM | Dec 23, 2017 | 499 posts since 2011

Does it make any difference when he signed it? Was there a benefit to signing it now or waiting?

Ally6770 | Dec 23, 2017 | 4,293 posts since 2010

Michigan's rate was 3.5% now it up. So were the other states from the point they were referencing. I assume it was from the election or the swearing etc. I did not get that. Just saw the chart on one of the forums on C-Span. Month to month rates do not mean a thing. It is year to year that has a point of reference. Not sure what the reference point they were using.

Ally6770 | Dec 23, 2017 | 4,293 posts since 2010

Went from 3.7% in July to 4.6% in November. 43,802 more unemployed since July.
Michigan Unemployment History from BLS
Unemployment Rate Michigan
Date.   National. Michigan. Unemployed
November 2017 4.1%.    4.6% 223,808October 2017   4.1%. 4.5% 217,830
September 2017 4.2% 4.3% 208,573
August 2017   4.4% 3.9% 189,919
July 2017. 4.3% 3.7%   180,006

Bozo | Dec 22, 2017 | 1,375 posts since 2011

RJM, I suspect it's not just a pure mathematical calculation in a rising-rate environment. You might swap out, and pay the (modest) penalty, only to find rates even higher (and terms more generous) in March of 2019. You might well find yourself asking this question again. Stated plainly, sometimes it's just better to let the pig work its way through the python.

RJM | Dec 23, 2017 | 499 posts since 2011

Well, going into a no penalty CD seems to suggest I come out ahead by $100. Or more if rates rise and I reinvest. But, Im going to take a few days and ponder it.

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