Why Bank CDs are Terrible

Certificate of Deposits (CD) right now is not the thing to get as interest rates are rising and you may find online savings accounts have an even higher interest rate than a CD! Given the choice, you obviously would pick a savings account over a CD because it is more liquid and you will not be penalized for breaking the terms of the CD.

How’s it going everybody this is pete the bush today i’m gonna talk about cds and why i hate them so much cd stamp or certificate of deposit and it’s something that bank will sell you in durations of something like six months one year two year or even five years these cds would often offer you an interest rate that’s a little bit higher than what you would get in

An online savings account however if somehow you need to withdraw the money before the certificate of deposit matures they’re going to not pay you interest for a certain period of time or they would charge you a penalty fee just as an example i’m gonna name a few online savings account that gives very very good interest rate for example synchrony gives a one point

Three percent apy american express savings gives a one point two five percent apy goldman sachs online bank gives a one point two percent apy ali bank gives a one point two zero percent ap y discover bank gives a one point one five percent a py if you go to your local retail bank and shop around for a cd they’re likely going to give you an interest rates that’s

See also  Why are we still not vaccinating our children? | Crunched

Comparable to an online savings account so to me putting your money in an online savings account it’s generally better than buying at a cd rate that’s exactly the same rate your money in an online savings account is much more liquid compared to a cd where you essentially get locked in for a year or more now let’s say you’re smarter than this and you don’t go to

The big banks and buy cds from a big banks where your rate will be a little bit lower you go online and shop for one now you’re gonna find cd rates between 1.5% for holding it for one year and two point three five percent for a cd of five years now i don’t know about you but one year is a really long time whenever i try to put money anywhere for one year i don’t

Really know if i will need that money in one year’s time or not things change so much and i’ve seen many people who buy cds end up having to withdraw money from their cd and they end up not getting several months worth of interest or they have to pay a penalty fee so to me one year is like an eternity and five years i won’t even think about that you can get two

Point three five percent but it’s only one point oh five percent more than what i get at an online savings account which means every $10,000 i invest i’m gonna get a hundred and five dollars it is something but it being so illiquid is a really main concern for me now if you have a lot of cash and you somehow need to keep it in somewhat liquid form such as in a cd

See also  Coronavirus Outbreak: 1st Deaths in USA, Thailand, & Australia

But not completely liquid then you could think about staggering your investment so you put a chunk in right now and three months later you buy another chunk three months later you buy another chunk so by the time one years up you would always have something that matures every single quarter or you could even do it every single month so then if you end up needing i

Don’t know a few thousand dollars you can count on something maturing every single month now for me because my money usage is so unpredictable i might need to buy a car all of a sudden and then i would need ten twenty thousand dollars one last thing i like to mention is that the fed is increasing their interest rate now it’s gonna creep up a little bit at a time

I’d say maybe a quarter percent every single year for the next few years so what does this means you it means that if you mistakenly get the five year cd or even a three year cd if the interest rate goes up by a quarter percent or more every single year you’re gonna end up in a situation where you’re holding on to the cd and the interest rate in it it’s going to be

Less than what you can get at an online savings account at some point so right now because the interest rate is going higher and higher it might just be better off to hold on to your cash in an online savings account and just wait for the natural online savings rate to go up i hope you enjoyed this video and get a good sense on where you should park your cash now

See also  A Serious Message From Chelsea

This is only for emergency cash if you have anything more than that of course you should really just be investing it don’t forget to give me a like on this video comment down below let me know where you prefer to park your emergency cash if you’re interested in supporting my channel don’t forget to check out my audible link down in a video description below where

You can get a free audio book and if you don’t like this audiobook or this service you can cancel it before the subscription expires and you don’t have to pay a thing now you can use this audiobook to listen to it on your commute or whatnot and just kind of double duty the time that you used to do your commute and you can kind of expand your mind at the same time

You can also support my channel directly through my patreon link over here where i give various perks at various contribution levels such as help with your credit score or help with your finances and as always don’t forget to subscribe to my channel over here and click that bell icon next to that subscribe button so that you get a notification whenever i upload a

Brand new video thanks for watching

Transcribed from video
Why Bank CDs are Terrible By BeatTheBush

Scroll to top