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
Let’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?