Pentagon Federal 5-Year, 7-Years CD Rates at 3.04% APY

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Pentagon Federal Credit Union officially announced some competitive new rates for their money market certificates (basically CDs, or certificates of deposit) starting December 1st, 2013. The minimum opening deposit is $1,000.

Term APY Early Withdrawal Penalty*
(days of interest)
2-Year CD 1.41% Last 180 days
3-Year CD 2.02% Last 180 days
4-Year CD 2.22% Last 180 days
5-Year CD 3.04% Last 365 days
7-Year CD 3.04% Last 365 days

Here is an interesting chart comparing the effective APY depending on holding period (taking into account the early withdrawal penalty) for the 4-year and 5-year CDs. We see that the 5-year CD (and 7-year CD) actually matches the 3-year CD held to maturity at the 3-year mark (both 2.02%) and is slightly better than the 4-year CD held to maturity at the 4-year mark (2.28% vs 2.22%). However, for some interim time periods (7 to 28 months) the shorter penalty will make the effective yield of the 4-year CD higher.

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Pentagon Federal Offering 3-Year CDs at 2.02% APY

Pentagon Federal Credit Union is now offering 2.02% APY rate on it’s 3, 4, 5, and 7-year CDs (they call it a Money Market Certificate). The minimum opening deposit is $1,000. Early withdrawal penalties are as follows:

  • For terms from 6 months to 4 years, you will lose the last 180 days of interest. If you haven’t earned 180 days of interest yet, you lose all the interest and get back only your opening amount.
  • For terms of 5 years or longer, you will lose the last 365 days of interest. If you haven’t earned 365 days of interest yet, you lose all the interest and get back only your opening amount.

As a credit union, you must meet their eligibility requirements to join. Basically all members of the military and their immediate families are welcome, as well as many other military-related groups. Otherwise, simply become a member of the organization Voices for America’s Troops. Membership costs $15/yr, and you don’t need to renew to remain a PenFed member. “Voices for America’s Troops advocates for a strong national defense, including sustaining and improving quality of life programs for America’s troops, their families and survivors.”

(I ran a search through the blog archives and found a post about PenFed offering 6.25% APY 3-year CDs back in late 2006. I wonder how long until we see rates like that again?)

Santander Bank extra20 Checking: Effective 16% APY?

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Santander Bank (formerly Sovereign Bank) has a new banking package called the extra20 checking and savings account that pays you up to $20 each month:

  • You must open both an extra20 checking and extra20 savings account.
  • Get a $10 bonus each month that you have direct deposits totaling $1,500.
  • If you qualify for the first $10, get another $10 bonus each month that you pay two bills from your extra20 checking account through Online BillPay.

$20 a month = $240 a year. If you choose to simply use this account to pay your bills, it shouldn’t be hard to keep a $1,500 average balance. Earning $240 on a $1,500 balance works out to a 16% APY. If you aggressively emptied your account after each direct deposit, you could increase this effective APY even more.

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Ally Bank CD Early Withdrawal Penalty Change: Details & Analysis

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Ally Bank LogoAlly Bank just announced that they will be changing the early withdrawal policy on their CDs starting on December 7, 2013. Found via Ken Tumin’s DepositAccounts post, the details are now officially outlined in the fees tab of their certificates of deposit page. A screenshot:

I have several 5-year Ally CDs earning between 1.8% APY and 3.1% APY, bought largely due to their uniquely short 60-day interest penalty as it meant that I could effectively have access to my funds if required and still earn an interest rate that was higher than anything any other bank CD.

For example, let’s look at their 5-year CD currently paying a 1.60% APY (as of 10/27/13) with no penalty, a penalty of the last 60 days of interest, and a penalty of the last 150 days of interest. Here’s how your actual annualized interest rates would look like based on time of withdrawal:

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Citibank Checking Account Promotion: 20,000 ThankYou Points

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Update: Citibank has a new checking account promotion for new customers. You can get up 40,000 ThankYou points if you can maintain a $50,000 balance, but the more accessible option can still get you a nice 20,000 ThankYou points. I’ll only focus on how to get the 20k offer below. This would combine well with the 30,000 ThankYou point bonus from the Citi ThankYou Preferred card. Don’t forget to maximize the value of your Thank You points.

First, you must open a Basic Banking package either through the link above or by calling 1-866-583-6706 and using promo code CZC2. As long as you make 1 direct deposit and 1 bill payment each monthly statement period, you’ll pay no monthly service fee. Alternatively, keeping $1,500 in the account by itself will waive the $10 monthly service fee.

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Capital One 360 Financial Independence Day Promo 2013

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(Update: Promo has ended)

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Fixed Annuities: Maximize State Guaranty Coverage Limits

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A recent article by Scott Burns talked about investing in deferred fixed annuities with CD-like qualities, an example offered a 3% yield guaranteed for 5 years plus no surrender charges (similar to early withdrawal penalty) after 5 years. This is a better rate than current bank CDs offer, and annuities can grow tax-deferred for those saving for retirement (withdraw as early as age 59.5)*. After the 5 years, you roll the annuity over to another company if the new rate is no longer good enough. The catch? The annuities that have the best rates often don’t have the highest credit ratings.

A possible solution? Make sure you stay under the coverage limits of your state’s Life & Health Guaranty Association. From NOHLGA.com:

State life and health insurance guaranty associations are state entities (in all 50 states as well as Puerto Rico and the District of Columbia) created to protect policyholders of an insolvent insurance company. All insurance companies (with limited exceptions) licensed to sell life or health insurance in a state must be members of that state’s guaranty association.

These are not federally-backed like FDIC insurance. Instead, all the member insurance companies agree to cover each other in cases of insolvency up to the policy limits. In order to be a licensed insurer, you need to maintain a certain level of financial stability. But just like banks, some insurers are stronger than others. So if you’re going to go over the limits, the standard advice is to go with a top credit rating from AM Best, Moody’s, or S&P. However, credit ratings can go down over time, and you may be holding these annuities for many years. Therefore, it’s still safest to stay under the limits.

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Savings I-Bonds May 2013 Upcoming Rate: 1.18%

New inflation numbers for March 2013 were just announced, so it’s time for the usual semi-annual update and rate predictions.

New Inflation Rate
September 2012 CPI-U was 231.407. March 2013 CPI-U was 232.773, for a semi-annual increase of 0.590%. Using the official formula, the variable component of interest rate for the next 6 month cycle will be approximately 1.18%. The new fixed rate is nearly guaranteed to be zero, so the total rate will be 1.18% as well. If you have an older savings bond, your fixed rate may be different.

Purchase and Redemption Timing Reminder
You can’t redeem until 12 months have gone by, and any redemptions within 5 years incur an interest penalty of the last 3 months of interest. A known “trick” with I-Bonds is that if you buy at the end of the month, you’ll still get all the interest for the entire month as if you bought it in the beginning of the month. It’s best to give yourself a few business days of buffer time though, since if you wait too long your effective purchase date may be bumped into the next month.

Buying in April

If you buy before the end of April, the fixed rate portion of I-Bonds will be 0.0%. You will be guaranteed the current variable interest rate of 1.76% for the next 6 months, for a total rate of 0 + 1.76 = 1.76%. For the 6 months after that, the total rate will be 0.0 + 1.18 = 1.18%. Let’s say we hold for the minimum of one year and pay the 3-month interest penalty. If you buy on April 30th and sell on April 1, 2013, you’ll earn a 1.28% annualized return for an 11-month holding period, for which the interest is also exempt from state income taxes. This is better than any 1-year bank CD that I can find right now, keeping in mind the liquidity concerns and the purchase limits. If you hold for longer, you’ll be getting the full 1.47% over the first year.

Given the combination of current low rates and the fact that you lose the last 3 months of interest (again, for holding less than 5 years), it might be better to wait long enough to grab 12 full months of interest by holding for 15 months (14 buying late). If you buy on April 30th and hold until July 1st, 2014, you’d achieve a annualized return of ~1.26% over 14 months. After that, you can see what the new rates are and decide whether to keep holding them.

Buying in May

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Cash Reserves Update: Best Available Interest Rates – March 2013

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Our family keeps a full year of expenses put aside in cash reserves; it provides us with financial stability with the additional side benefits of lower stress and less concern about stock market gyrations. Emergency funds can actually have a better return on investment than what you see on your bank statement.

I’ve been slacking in terms of updates on this topic. While I still like to maximize my interest, there just hasn’t been many new developments that make me want to jump from one bank from another. However, if you haven’t optimized your cash recently, you may be stuck in a money market fund or megabank saving account paying 0.05% or less. You can definitely still do better than that! Here are what I consider the highlights of the best currently available interest rates.

Certificates of Deposit

If you have a large cushion, it’s quite likely to just sit there for years or more. Therefore, you may wish to put some of it in longer-term investments where you can take the money out in a true emergency and paid an early withdrawal penalty.

  • Everbank’s Yield Pledge Money Market and Interest Checking account both offer 1.10% APY guaranteed for the first 6 months for new accounts. Since it is fixed, this is essentially a 6-month CD with a higher rate than any other 6-month CD rate out there and with no early withdrawal penalty to worry about.
  • Ally Bank Raise Your Rate CDs have a rate bump feature; the 2-year term pays 1.05% APY and the 4-year term pays 1.30% APY (as of 11/1/13). You can change your rate after your account is opened — if their rate on this CD goes up, yours can bump up to match it (one interest rate increase with the 2 year term, two interest rate increases with the 4 year term).They also offer traditional Ally Bank High-Yield CDs with 3-year CDs at 1.20% APY and 5-year CDs at 1.60% APY (as of 11/1/13) currently. Early withdrawal penalty is only 60 days.
  • Discover Bank CDs are currently offering 3-year CDs at 1.25% APY, 5-year CDs at 1.65% APY, 7-year CDs at 1.80% APY, and a 10-year CD at 1.90% APY. Early withdrawal penalty varies from 6 months for the 3-year to 15 months on the 7 and 10-year CD.
  • PenFed Credit Union CDs are currently offering 3-year CDs at 1.60% APY, 5-Year CDs at 1.65% APY, and a 7-Year CD at 1.75% APY. Early withdrawal penalty varies from 6 months for the 3-year CD to 12 months on the 5 and 7-year CD.

Ally Bank’s Flexible Certificates of Deposit

Ally Bank LogoLet’s focus on the Ally Bank certificates of deposit, where you can still access your money as long as you pay a early withdrawal penalty of 60 days interest – significantly less than at other banks. Why is this good?

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Best Value for Citi ThankYou Points Redemptions

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If you have a Citi credit card or a Citibank account with the ThankYou points rewards system, you have a wide array of options to redeem your points at ThankYou.com. But while that fancy coffeemaker may look nice, chances are the cash equivalent value for your points is quite poor. I’ve covered this in bits and pieces before, but here’s a complete guide to getting the most value out of your points.

Eligible ThankYou accounts (* are the ones I have linked to my account):

Best Value Option #1: Limited Time Offers

If you have either patience or luck, Citi does offer “sales” on gift card redemptions which can reduce the cost of a reward by up to 25%. For example, right now until 3/31 you can get a $50 Home Depot gift card for 4,500 points. Normally, you’d need 5,000-6,000 points. That equates 1.11 cents in gift card value per point. If you wanted cash, you could sell a Home Depot gift card at PlasticJungle.com for 87% of face value in cash, 91.35% in Amazon.com gift certificates. That equates to 0.967 cents per point in cash.

Previously ThankYou point sales have involved gift card to other popular retailers like Wal-mart, Lowe’s, Kohl’s, Best Buy, Gap, and Macy’s. The regular price is usually 1 cent in gift card value per point.

Best Value Option #2: Student Loan & Mortgage Rebate Checks

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Capital One 360 Savings Account Review

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Capital One bought ING Direct USA back in early 2012, and has finally completed their transition and re-branding. Their new savings account product is called Capital One 360 Savings. Since I’ve had an account with them for over a decade (September 2001, as they remind me every time I log in), here’s an updated review of my 2nd oldest bank account meant for both new and existing customers.

User Interface

At first glance, the only thing that really changed was that the primary colors went from orange and blue to Capital One’s red and blue. However, there are a few other tweaks that I noticed were different from the ole’ ING Direct days.

Login. This is still a little unique amongst online savings accounts. You login with either a username/account number and a PIN number (not an alphanumeric pA$sW0rd). If you have an old 4-digit PIN, they’ll ask you to change the PIN to a 6-digit number for better security. In addition, while the default entry method is via mouse clicks to avoid keystroke loggers stealing your password, you can also use a keyboard to enter the PIN with a creative key-to-number conversion that changes each time. See screenshot below:

Main account screen. The home screen is simple and straightforward, as always. There is better integration with their brokerage arm, Sharebuilder, with your balance automatically showing and the ability to perform same-day transfers between accounts. So if you have a Sharebuilder account, you essentially have a high-interest sweep option instead of a money market fund paying zero interest. Screenshot:
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Capital One 360 Black Friday 2012 Promotions

Capital One 360 has a few Black Friday weekend deals for their 360 checking account and their Kids Savings Account, some easy bonus money that you can use to pay for those gifts. The checking account is designed to complement the savings account, and actually pays higher interest for large balances. Good for 3 days only, from now until Sunday at midnight Eastern.

$125 360 Checking account opening bonus
Open a 360 Checking account November 23rd – 25th and make a total of 10 purchases (either signature or PIN-based) using your 360 Checking Card or 10 CheckMate deposits (or any combination of the two) within 45 days. Your $125 bonus will be automatically deposited into your account on day 50. Bonus only available for new 360 checking accounts.

Open a Kids Savings Account and get a $10 bonus.
Open a Kids Savings Account November 23rd – 25th and we’ll put a $10 bonus into your new account. Only available when you open a new account with at least one new Customer (either you or the kiddo must be a new Customer to Capital One 360). $10 bonus starts earning interest upon account opening, and is available for withdrawal after 30 days. A kid-friendly 0.75% variable APY (effective 11/21/2012)