Savings Account & MMA Rates
CD (Certificate of Deposit) RatesHere’s another long-term CD with such a small early withdrawal penalty it’s a better bet than the top-paying short-term CDs.
It’s Ally Bank’s 5-year certificate of deposit.
We got into this discussion last week, when we looked at whether the three best 5-year CDs could be gamed to out-earn the best 12- or 24-month CDs.
We found the one from Florida’s Bank United would indeed pay more if you cashed it in after just one or two years because it’s early withdrawal penalty is only three months worth of interest.
The other two would not because their early withdrawal penalties are too onerous.
That led Tracy, one of our readers, to suggest that Ally’s 5-year CD would be another good substitute for short-term CDs.
The online bank of GMAC Financial pays somewhat less than Bank United — 3.09% APY vs. 3.50% APY. (Since we wrote that post, Bank United has lowered the rate on its 5-year CDs to 3.25% APY.)
But Ally has the most lenient early withdrawal penalty we know of on long-term CDs — just two months worth of interest.
If you cashed in after one year, you’d still earn about 2.6% after paying the penalty — far more than the 1.90% APY the best 12-month CD is paying.
Redeem your certificate after two years and your return would increase to a little more than 3% — considerably higher than the 2.30% APY the best 24-month CD is paying.
It’s also very similar to what you’d earn with Bank United’s new, lower rate.
(10 votes, average: 4.30 out of 5)
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