bank rates

Rethinking My 3-Year CD Strategy – Again

puzzle pieces in the skyBack in March, I wrote about how depressed interest rates had led me to abandon 3-year CDs then maturing in favor of 5-year replacement CDs.

This strategy was necessary to maintain the approximate annual percentage yield on my maturing CDs – 2%.

And, although committing funds for five years was acceptable, it wasn’t particularly desirable because it left me uncomfortably exposed to significant increases in market rates before the replacement CDs matured in 2019.

I would have much preferred to hedge by splitting the reinvestment of my maturing balances equally between 3- and 5-year CDs, accepting an average rate higher than the yield on the former and lower than the yield on the latter.

Just 2½ months ago, this was impossible if I wanted to achieve at least a 2% APY.

However, it became possible in May, thanks to CD promotions at institutions at which I had existing accounts – USAlliance Federal Credit Union, Firstmark Credit Union and CIT Bank.

I reinvested funds from 3-year CDs that had recently matured as follows:

  • For the new 3-year piece, I placed equal amounts in the 1.61% APY 35-month promotional CD being offered by USAlliance and the 1.80% APY 40-month promotional CD being offered by Firstmark.
  • For the new 5-year piece, I placed funds equal to my total 3-year CD investment in a 5-year CIT Jumbo CD at the promotional rate for existing customers of 2.40% APY.

My (approximately) 3-year APY for this combination averages 2.05%.

And I have additional maturing CD funds becoming available this week.

I plan to place half these funds in a USAlliance 35-month CD at the new, higher promotional rate of 1.71% APY and half in a GE Capital Retail Bank (soon to be renamed – inexplicably – Synchrony Bank) 2.30% APY 5-year CD.

My average APY for 35 months will be 2.005%.

(I could open a 40-month Firstmark CD instead of the USAlliance 35-month CD, achieving an average APY of 2.05%, but setting up a Firstmark CD involves funding delays I’d rather avoid right now.)

I suppose it’s a stretch to call this a “strategy.” It’s too haphazard.

You see, it requires finding the right combination of CD rates being offered by the right institutions at the right time – an all-the-stars-in-alignment kind of thing.

But, strategy or not, at least it’s worked in May, allowing me to survive yet another month of awful interest rates.

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