Vanguard Brokerage Is Offerin A 3.25% CD.

arlen4 | Jun 5, 2015 | 5 posts since 2013

Vanguard Brokerage is offering a 10-year CD from CIT Bank at 3.25% maturing 6/17/2025. This seams to be the best rate available. Hopefully, this is just the beginning of "rate wars"!!! Arlieboy

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paoli2 | Jun 6, 2015 | 2,501 posts since 2011

I would not think this is the beginning of a real rate war when it is a brokerage CD. Tying your money up for 10 years with a brokerage CD is definitely not the same as doing it with a bank or even credit union one. If you needed to sell it, it is a different ballgame. Just know what you are getting into before you go that long with a brokerage CD especially if you are putting a lot of money into it.

paoli2 | Jun 6, 2015 | 2,501 posts since 2011

BTW, I just returned home and did some rechecking. The main thing I see good about the Vanguard rate is that Vanguard buys it's CDs from other banks. None of my local banks have even moved their 5 year CD rates up and yet Vanguard has several 5 year CDs over 2%. I think this may be a good sign that if Vanguard can find banks to get these CDs from that before long we may see the 5 year CD go back up for 2% or more. Can't see it being a "Rate War" but just that other banks and even credit unions may have to raise their longer term CDs to rates to match those we can get from Vanguard. I haven't had a chance to do it yet but will check Fidelity and see if they are buying CDs with same rates as Vanguard. The both usually use the same banks for their CDs from my experience.

arlen4 | Jun 6, 2015 | 5 posts since 2013

paoli2 is incorrect about selling a brokerage CD. It is like selling any bond - if rates go up your CD is worth less, if rates go down, your CD may appreciate. I have sold many broker CD's, it is no big deal! Plus no early CD withdrawal penalties!

paoli2 | Jun 7, 2015 | 2,501 posts since 2011

Don't be swayed by the "no early withdrawal penalties". If you listen to the recordings or read the Disclosures from both brokerages I mentioned, you will note they make it clear they don't even assure one that they will have a Secondary Market available for us to try to sell the CD if it is necessary. If they do, what you end up selling it for can cost more than an outside penalty we get with banks etc. If you have sold many broker CDs without a problem and didn't lose a lot of money doing so, you are very fortunate to have done so. I only buy the CDs for IRAs and only knowing that I won't be selling them in the future.

BTW, I did check Fidelity's CDs and they were showing basically the same banks and rates as Vanguard as I have known them to do for upteen years. It seems to always be the same group for both and usually the same rates. As I posted in another post, if you want their highest rate for whatever term, you need to catch the rates when they first post them. They are snatched up quickly and then you are left with the leftover lower rates. Best of luck to you for whatever you decide to do about that 10 year CD.

Rooks777 | Jun 7, 2015 | 38 posts since 2014

10 years is an awfully long time...A year and a half ago I sprung for the PenFed 7-year offering at 3.04% and I think that is about my limit. At the time, it felt as if the Fed was going to keep rates close to 0% for the foreseeable future. But with talk about hiking rates later this year or early next, I don't think I could responsibly lock up money for 10 years with such a low rate. It would need to be at least 4.5% for me to make that leap.

Tee | Jul 6, 2015 | 47 posts since 2013

I have never locked into a CD longer then one year and next year rates should be going up as long as the economy improves more...

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