Comments on: Don’t Be Tempted By Long-Term CD Rates

By: Amir

Amir — Tue, 02 Mar 2010 07:15:41 +0000

As long as penalty is 6-9 month a long term CD with ~4% and at least ~2.5% higher than any 1 year CD is very attractive and is actually pretty liquid. You only loose if in the next 6-9 the rates spike sharply up – and while that happened before, it’s likely best to take the best rate right now. usaa.com offers up to 4.06 right now for 7 years, though they don’t list the penalty. discover maybe the 2nd best right now with 3.7 and 9 month penalty for 10 years. found other credit unions/iras offering above 4, but those are not good for the general non IRA case.

By: Richard

Richard — Thu, 21 Jan 2010 23:07:42 +0000

Figure it out. If that 24 monther is earning the same interest rate or more in 2 years you could basically stay put until the market turns downward again or levels off, pay the penalty and then lock into a 7 year for a great rate. This is the same advice I once got from a tax accountant or a banker. They told me not to pay off my mortgage because of the tax advantages? What ever happened to common sense?? Not many are able to think for themselves!!

By: Steve

Steve — Mon, 18 Jan 2010 05:20:04 +0000

With the pathetic rates they are offering right now, I would be more inclined to invest my cash into collectibles that rapidly increase in value. Assuming you buy carefully, you will be able to at least get your full investment back (but a chance to make a nice profit) and you can sell the items without any time restrictions.

By: KenBDG

KenBDG — Sun, 17 Jan 2010 03:49:17 +0000

As Mark C stated, you can often come out better with a longer term with a higher rate and breaking the CD if rates shoot up. But one important note is that early withdrawal penalties can vary considerably. Some 5yr CDs have only a 6mo penalty, but some have much higher penalties. Acacia’s 5yr CD is an example with an 18mo penalty.

By: Mark C

Mark C — Sat, 16 Jan 2010 14:24:45 +0000

Bad advice. You can usually go for the longest term to lock in the highest rate, then break the CD if rates go up substantially. You will usually come out equal or better to the shorter term CDs yield, even with the penalty which is usually 6-9 months interest. Always run the numbers and don’t just accept advice like this at face value.

By: William S

William S — Fri, 15 Jan 2010 20:22:58 +0000

Excellent advice. Thanks!