EverBank Returns to Its Earlier Monkey Business Following TIAA Acquisition

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EverBank today launched a 3-year MarketSafe Emerging Currency CD.  I could write ad nauseum here about how inappropriate this investment is for most unsuspecting investors.  I could write about why it shouldn’t be called a Certificate of Deposit.  I could write about how I believe that EverBank is violating the 1933 SEC Act.  But, wait a minute.  I already did.  This product is exactly the same as a product that EverBank offered in 2014 and that I wrote about extensively then (see my article here), except that they have replaced one dictatorship’s currency for another (swapping out the Russian ruble for the Turkish lira) and decided that Indonesia’s rupiah is more attractive than South Africa’s rand. The Chinese renminbi, the Indian rupee and the Brazilian real, however, remain constants in this product.  The other things that remain a constant is that neither the people offering it nor those buying it have any idea what they are doing, and those buying it will not see any appreciation on their investment.

As a general proposition, this is the wrong time in the cycle to be playing with emerging markets, although some countries have unique circumstances that will enable them to outperform (perhaps Argentina).  If you must invest, the play is to invest in those countries or in U.S. or European denominated debt through a fund offered by a big fund family that knows what they are doing in emerging markets (maybe Ashmore).  And, if you insist on investing in currencies, the major investment banks offer structured products geared to lever appreciation in U.S. dollar terms should another currency (a single currency) appreciate against it.    Under any circumstance, avoid this EverBank product.

The best 3-year CD rates are listed here.

Three Years Ago, A 5-Year CD Made a Lot of Sense at 2.35%; Now Maybe Not

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Three years ago, the best online 5-year CDs were at or around 2.30% - 2.35%.  At the time, I put a fair amount of my personal money in 5-Year CDs, and I recommended that readers of BestCashCow to continue doing the same. 

I obviously regret not having put the money in Facebook or Netflix or Amazon!  But, these CDs have given me safety for savings accounts and a return on cash well above that offered by any savings accounts for the last three years.  To boot, at no time in the interim has it been possible to buy a 5-year CD at that rate.  (In early 2016, the best 5-year CD rates briefly reached 2.25%, but for most of the last year-and-a-half, 5-year rates were below 2%).

Now, the best 5-year rates are back to 2.35%.  Synchrony and Sallie Mae are both established online banks offering this rate and it seems tantalizing in light of where rates have been. 

But, savings rates are normalizing quickly (see the best rates here).    2-year CD rates and 3-year CD rates offer returns close to the 5-year CD without the time commitment.  I would be inclined to hold on the 5-year and stay in savings for now.   Given the Fed’s continued tendency to raise interest rates over the next 12 to 15 months, I think we may see 5-year CD rates above 3% before Janet Yellin hands over the reigns of the Fed to Gary Cohn.  In fact, the Federal Reserve continues to guide towards a Fed Funds rate at or above 3% in 2019 in which case savings rates and short-term CD rates will be at that level in less than 2 years.

Many other commentators will argue that you should jump on the 5-year CD at this point and pay the early withdrawal fee in a year if rates go up.  We aren’t inclined to recommend this strategy here either.  While Synchrony has an early withdrawal penalty of only 1-year’s interest and Sallie’s is 6-month’s interest, it is important to note generally that banks retain the right to refuse to allow early withdrawals (   Therefore, BestCashCow would not recommend general investment or savings strategies relying on early withdrawals from CDs.

Before investing in any CD, we highly recommend that you read our 65 questions to ask which is also available to download as an E-Book by clicking on the right column.  

We also always recommend that you check rates at local banks and local credit unions before locking into online CDs; institiutions near you may offer better rates! 

2.78% APY 4-Year CD vs. 2.78% APY 5-Year CD?

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2.78% APY is an excellent rate on a 4-year CD.   It is also an excellent rate on a 5-year CD.  The 2.78% number is actually much higher than we have seen on a CD of that length in years, and higher than any nationally offered rate.

Community Trust Bank is offering the 2.78% APY rate on both the 4-year and the 5-year product at 6 of its branches in the Lexington, KY market.  If you are lucky enough to live in that market, you have the opportunity to get into a rate that still is very hard to get in much of the rest of the country.

In fact, the rate is so much higher than those offered nationally, if I lived there I might just choose to opt for the 5-year product over the 4-year one, and be assured of locking into an extra year of interest at the 2.78% rate.

Community Trust is offering these products only at its 6 branches in Lexington, Kentucky - its Beaumont branch, its Hamburg branch, its Leestown branchits Pasadena branch, its Richmond branch and its Vine Street branch.  The rate requires a $1,000 minimum deposit and proof of residency in Fayette County.

You may be able to get a 4-year CD rate or a 5-year CD rate like this at a bank where you live!  Check the best local 4-year CDs here.   Check the best local 5-year CDs here.

Also see the best online 4-year CD rates here and the best 5-year CD rates here.  

Two Months Ago I Bought A 1-Year CD Paying 1.35%; It Was a Mistake

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Less than two months ago, I locked into a 1-year CD paying 1.35%.   It was the best rate at the time and I really am unlikely to need the cash for the next 12 months (now 10 months).  Nonetheless, I know now that I locked in too low.

The best nationally offered one-year CD rates are now paying close to 1.50%.   One-year CD rates offered by banks or credit unions in your local area or state may even be paying higher.  And, Ally Bank is offering an 11-month No Penalty CD that pays 1.50% on balances over $25,000.  The Ally product gives depositors a much better rate than I am receiving and the ability to break the CD without an early withdrawal penalty. 

But, I am not even so sure that I should have locked into a one-year CD at all.  Savings rates are moving up quickly now with plenty of national offerings at 1.30%.  Again, local rates at banks and credit unions that may be available to you may be even higher.

Since I might need the cash to take advantage of the stock market crash that may come when impeachment proceedings begin in the fall, I certainly now wish I had just foregone locking into a gain over cash of what now looks at best to be just a couple of dollars.

Did you know that at some banks it may not even be possible to redeem your CD early, even with the payment of early termination fees?    

Before getting a CD read our 65 Questions to Ask before Choosing a CD which is also available as a e-book by clicking in the right column. 

EBSB Direct Is Offering A 19-Month CD at 1.61%

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Earlier today, EBSB Direct began offering a 19-month CD a 1.61%.  This rate is nationally offered and requires only a $1,000 minimum.

At the time of this writing, this rate is higher than any nationally offered 18-month CD and as high as all but the 5 highest nationally offered 2 year CD rates.   This offer is therefore compellingly priced on a national level.   Of course, there may be higher rates offered in certain markets and you will want to review local rates for 18-month CD rates here and for 2-year CD rates here to see rates in your market before locking in.

Please note that BestCashCow sees short CDs as somwhat compelling now.  However, after the recent Fed move, we think some level of caution is warranted right now around all CD products. Savings rates are rising now, and you run the risk of locking into something that will be offering less than the best savings rates in a matter of months. 

EBSB Direct is a subsidiary of East Boston Savings Bank.  You can learn more about the online bank here, and its parent here.

More information on this and other special-rate CDs can be found here.

Exhausted from Low Savings Account Rates? Consider 5-Year CDs

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It has been 9 years already of making virtually nothing from savings account rates.  Even with the best rates recently moving up to the 1.05% – 1.25% range as the Federal Reserve has raised the Fed funds rate, cash has been a frustrating asset class for many years now.

Many retirees and others who depend on appreciation of their cash not just to live, but to keep pace with real inflation, have begun to throw in the towel.  They have largely moved to riskier asset classes such as municipal bond funds and high yielding dividend stocks. 

I do not dispute the importance of dividend stocks in a balanced portfolio.  Verizon, Exxon and the major European pharmaceutical stocks pay fantastic dividends.  Even if you believe that the stock market is overvalued and ripe for a significant correction as the world begins to grapple with the consequences of an unstable US President, you probably should have some exposure to high yielding equities.

Your exhaustion with low savings rates, however, should not lead you into municipal bonds or municipal bond funds, Treasuries or virtually anything tied to a fixed rate of return over the long term (certainly not annuities, etc.).   If and when interest rates move up, these things will be slaughtered (and, may even become illiquid).

Instead, look to 5-year CDs.   A 5-year CD paying 2.30% provides about twice what leading online savings rates are paying at the moment.   Buying one with a 6-month early withdrawal fee, and reasonable certainty that the bank will honor it (read this article for more information on the risk to early withdrawal fees) will provide significant returns in today’s market and will also likely yield roughly about as much as an online savings account were you to redeem it early after, say, 12 months or a 1-year CD.  Most important,, you will have the option to hold it for the remaining four years and continue to make 2.30%.   And, equally importantly, you will not be slaughtered.

Key takeaway: Look at the early withdrawal fees on 5-Year CDs.  While EverBank’s fees are excessive, other major online banks have early withdrawal fees geared to match between six months and 1 year of interest.  

In sum, a number of 5-year CDs offered by leading FDIC-insured banks have 6 month early withdrawal options that provide the best and safest investment options for those who need steady and above-market interest rates.