11 month risk-free CD any good?

[etudiante04]

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Like many other med students, I am financially clueless. I barely have any savings. I am just getting my act together. At least, I have very little consumer debt - but a lot of student loan debt.

Bank of America is offering an 11 month risk free CD at a rate of 4.25%. Is it worht it? Or am I better of with a traditional CD?

Any advice would be appreciated!

 

[jefguth]

You should be able to get at least 5% on a CD, otherwise just go with a high interest savings account.

 

[pillowhead]

Like many other med students, I am financially clueless. I barely have any savings. I am just getting my act together. At least, I have very little consumer debt - but a lot of student loan debt.

Bank of America is offering an 11 month risk free CD at a rate of 4.25%. Is it worht it? Or am I better of with a traditional CD?

Any advice would be appreciated!

you can open a no fee, no minimum savings account with ETrade bank (FDIC insured) which will get you 5.05% and you always have full access to your money. we just moved most of our money from bank of america to ETrade because you really just can't beat that deal. The CDs can't compare and your money is tied up. (No, I have no affiliations with ETrade--just very happy with our new savings account after getting the first month's interest a few days ago!)

 

[etf]

in general, the rates banks pay go down proportional to their size. bank of america won't give you any interest, because they don't have to. your local credit union needs your business more, so they'll give you a higher rate.

 

[etudiante04]

Thanks for all your responses! Maybe I don't need to use BoA for a CD account. I assumed you open a CD account at a bank you already use. So what time frames are best for CDs? I don't want more than 5 years, but I need at least 6 months?

 

[bhollowp]

etudiante... google "CD ladder" if you are going to be putting the money away for more than a year or two. A simple way to set up a CD ladder is to start with a 3mo, 6mo, 9mo, and 12mo CD and then when each one matures, renew it for 12mo. That way you get access to the money every quarter if you need it, and the returns are better than just having one big CD you renew each year because of compounding.

As for where to open CDs - use the bank with the best APY, which is usually an online-only bank. Make sure its FDIC insured, though. Check out bankrate.com and search for CDs.

 

[The White Coat Investor]

That's a poopy rate for an 11 month CD. I would expect about 5.25%-5.5%. Consider a good MMF such as Vanguard's. www.vanguard.com

 

[RisingSun]

That's a poopy rate for an 11 month CD. I would expect about 5.25%-5.5%. Consider a good MMF such as Vanguard's. www.vanguard.com

Look into Washington Mutual's 5.5% online CD.

I defer to the wisdom of the much more knowledgeable people that frequent this board, but I believe that we will see a cut in interest rates by the feds soon if the market continues to plummet as it has recently. This will lower CD yields. I would take advantage of a >5% APY CD now, if you are considering getting one at all.

 

[etf]

Look into Washington Mutual's 5.5% online CD.

I defer to the wisdom of the much more knowledgeable people that frequent this board, but I believe that we will see a cut in interest rates by the feds soon if the market continues to plummet as it has recently. This will lower CD yields. I would take advantage of a >5% APY CD now, if you are considering getting one at all.

i'm not sure about any rate cut, but i definitely took the opportunity to pick up some junk bonds at some great prices (assuming no default).

 

[etudiante04]

What is "risk free" in terms of bank accounts (esp CDs)?

 

[alonepear]

Are there any risks associated with choosing a CD through a bank on the internet?

Some of the banks are local banks somewhere else in the US, and some are online-only. As long as they are FDIC insured are you assured your money is safe?

 

[The White Coat Investor]

What is "risk free" in terms of bank accounts (esp CDs)?

Any US-based bank at which you have less than $100,000 is risk free whether it is in CDs, a savings account, a checking account, or a bank's money market account. Treasury bills are also considered risk free and a GOOD US-company based money market fund (TRP, Vanguard, Fidelity etc) is also considered nearly risk free, even though the FDIC doesn't insure them.

 

[etudiante04]

Any US-based bank at which you have less than $100,000 is risk free whether it is in CDs, a savings account, a checking account, or a bank's money market account. Treasury bills are also considered risk free and a GOOD US-company based money market fund (TRP, Vanguard, Fidelity etc) is also considered nearly risk free, even though the FDIC doesn't insure them.

Thanks!!