Home > Interest Rates: Still Looking

Interest Rates: Still Looking

April 19th, 2013 at 07:30 pm

I'm slow. I'm still investigating options for cash we have on hand. Right now the money is in a money market account, earning 0.85%.

I started noticing how many credit unions exist around our area. I'm taking note of the names and locations and researching online. One credit union has a 36 month CD for 1.50% which seems really good. Or I could really lock the money up with a 60 month CD at 2.0%.

However, this money is what we are holding on to for our next down payment. Which we might need in about 2 years at the earliest. So I'd be better looking at a 16 month special CD rate of 1.05%.

The rates just aren't that exciting. I want more interest!! I will do something soon, just still haven't decided.

What is the best interest rate you are getting on your cash? Is it with a credit union, bank or other institution? How long do you have to keep your money invested without a penalty?

11 Responses to “Interest Rates: Still Looking”

  1. ceejay74 Says:

    My "best" is 1.0% with Barclays in an online savings account. I think my regular bank, where I keep my fast-access money such as medical funds, gives us .1%. Groan...

  2. snafu Says:

    The government has repeatedly announced that they will continue QE [artificially] keep interest rates low for at least a year to throttle inflation, give borrowers time to pay-down debt and hope employers will hire more staff to bring down unemployment/underemployment numbers. Add to that the profit for bankers who have forgotten the 4% spread between savings and loan rates to their best clients. Have you noticed the improvement in stock value of the top 5 banks? Oh my!

  3. rob62521 Says:

    We discovered a money market at the credit union we use and the interest rate was a little better because we had over $5000. It was 1%. Otherwise we had to tie our money up for over 2 years for a tying above that.

  4. Wino Says:

    I'd throw it all into mutual funds and take my chances. If you lose 10%, it's a tragedy that you can survive. If you make 10% it's a much better return than the savings, CD, or money market account. God favors the bold. The interest you're earning guarantees you lose money to inflation. I'd prefer to bet on the overall ingenuity of the American populace and management, and go for a stock index fund.

  5. creditcardfree Says:

    @Wino, after your post I did look at Vanguard. One of their tools suggested 50% into VBMFX (Bond Index), 35% VTSMX(Total Stock Index), and 15% VGTSX (International Stock Index). This does seem reasonable and more advantageous for earning better returns. We could add money to these, where most CD's we cannot. I'll be thinking about this and talking to my husband.

    Thanks for the idea. I'm not used to considering stocks for short term investing, since we will want the money in 2+ years.

  6. baselle Says:

    I'd go for a blue chip dividend fund and reinvest. If you can find a dividend fund that only invests in the dividend aristocrats (solid companies that raise their dividends every year), I'd go for that because the risk would be in the stock price itself, not in the dividend payout.

    One of the minor reasons I'm doing the kitchen remodel is that interest rates are so crappy. I know I can get more pleasure in the kitchen than I can in the monthly interest.

  7. creditcardfree Says:

    Ah, baselle, I like that idea! I see two Vanguard funds that might work VDAIX and VDIGX, liking the latter better.

  8. baselle Says:

    I'd also suggest that you overshoot your down payment savings a bit (5% - 10%) to compensate in case the stocks happen to be down when you need to sell. On the other hand, if they are down and you sell, you would "harvest" the tax advantage for that year. The possible refund might ease the sting a little. Dividends, I believe, are currently taxed like ordinary interest.

  9. ceejay74 Says:

    I too find this idea intriguing! You guys are making me think maybe I should put 50% of our down payment money into savings and 50% into Vanguard blue chip funds. Now to figure out how to do that (Just go to Vanguard's site?). I already have a Roth with them but this would be an ordinary taxable account, right?

  10. creditcardfree Says:

    @baselle, good idea to over shoot the goal.

    @ceejay, you should be able to open an account online, and yes, it would be a taxable account.

  11. Wino Says:

    I'm in VDAIX. I'm not unhappy with its returns.

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