Savings I Bonds November 2017 Update: 0.1% Fixed, 2.48% Variable Interest Rate

sb_poster

Update 11/1/17. The fixed rate will be 0.1% for I bonds issued from November 1, 2017 through April 30, 2018. The variable inflation-indexed rate for this 6-month period will be 2.48% (as was predicted). The total rate on any specific bond is the sum of the fixed and variable rates. See you again in mid-April 2018 for the next early prediction.

Original post 10/15/17:

Savings I Bonds are a unique, low-risk investment backed by the US Treasury that pay out a variable interest rate linked to inflation. You could own them as a replacement for cash reserves (they are liquid after 12 months) or bonds in your portfolio.

New inflation numbers were just announced at BLS.gov, which allows us to make an early prediction of the November 2017 savings bond rates a couple of weeks before the official announcement on the 1st. This also allows the opportunity to know exactly what a October 2017 savings bond purchase will yield over the next 12 months, instead of just 6 months.

New Inflation Rate Component
March 2017 CPI-U was 243.801. September 2017 CPI-U was 246.819, for a semi-annual increase of 1.24%. Using the official formula, the variable component of interest rate for the next 6 month cycle will be 2.48%. You add the fixed and variable rates to get the total interest rate. If you have an older savings bond, your fixed rate may be very different than one from recent years.

Purchase and Redemption Timing Reminders
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. If you miss the cutoff, your effective purchase date will be bumped into the next month.

Buying in October 2017
If you buy before the end of October, the fixed rate portion of I-Bonds will be 0.0%. You will be guaranteed the current variable interest rate of 1.96% for the next 6 months, for a total 0.00 + 1.96 = 1.96%. For the 6 months after that, the total rate will be 0.00 + 2.48 = 2.48%.

Let’s say we hold for the minimum of one year and pay the 3-month interest penalty. If you theoretically buy on October 31st, 2017 and sell on October 1, 2018, you’ll earn a ~1.76% annualized return for an 11-month holding period, for which the interest is also exempt from state income taxes. If you held for three months longer, you’d be looking at a ~1.91% annualized return for a 14-month holding period (assuming my math is correct). Compare with the current best bank interest rates.

Buying in November 2017
If you buy in November, you will get 2.48% plus an unknown fixed rate for the first 6 months. The fixed rate is likely to be zero or 0.1%. (Current real yield of 5-year TIPS is ~0.20%.) Every six months, your rate will adjust to the fixed rate plus a variable rate based on inflation. If inflation picks up, you’ll get a hiked rate earlier than versus buying in October.

If haven’t bought your limit for 2017 yet, I don’t feel strongly one way or the other. If you like the idea of locking in a rate of return for the next 12 months that is a bit better than current CD rates, buy in October. If you think inflation will go up soon, buy in November. Your November fixed rate might be also be bumped up a tiny bit to 0.1%.

Existing I-Bonds and Unique Features
If you have an existing I-Bond, the rates reset every 6 months depending on your purchase month. Your bond rate = your specific fixed rate + variable rate (minimum floor of 0%). Due to their annual purchase limits, you should still consider their unique advantages before redeeming them. These include ongoing tax deferral, exemption from state income taxes, and being a hedge against inflation (and even a bit of a hedge against deflation).

Over the years, I have accumulated a portfolio of I-Bonds with fixed rates varying from 0% to over 1%, and I consider it part of my inflation-linked bond allocation inside my long-term investment portfolio.

Annual Purchase Limits
The annual purchase limit is now $10,000 in online I-bonds per Social Security Number. For a couple, that’s $20,000 per year. Buy online at TreasuryDirect.gov, after making sure you’re okay with their security protocols and user-friendliness. You can also buy an additional $5,000 in paper bonds using your tax refund (see IRS Form 8888). If you have children, you may be able to buy additional savings bonds by using a minor’s Social Security Number.

For more background, see the rest of my posts on savings bonds.

[Image: 1946 Savings Bond poster from US Treasury – source]

CIT Bank Review: Savings 1.35% APY, No-Penalty CD 1.45%, Opening Process

citbank200CIT Bank (not be confused with Citi Bank) has become one of the larger online-only banks with a multi-year history of competitive rates. They don’t offer a checking account, so their products are mostly designed to be savings products with high interest rates. Here are their most-interesting products, in my opinion:

They also have traditional term CDs as well as fancy CDs that allow add-on deposits and rate-bumps. Unfortunately, none of those rates are high enough even with the fancy features.

Rates are as of 10/16/17. Compare with the Ally Bank 11-month No Penalty CD, which requires $25,000 to open to get the 1.50% APY rate. At balances under $5,000, the Ally rate is only 1.00%.

Opening process overview. I recently opened an account with them, and here’s my review of the opening process.

  • The application process was completely online. You provide the usual personal information.
  • You must submit to a credit check, but in my experience it was a “soft” pull which did not harm my credit. None of my various credit monitoring services showed it was a hard pull.
  • You may fund via (1) electronic ACH transfer, (2) wire transfer, (3) mobile check deposit via CIT Bank mobile app (iOS and Android), and (4) mailing in a paper check. There was no option for credit card funding. I picked online ACH funding and you need to provide routing and account numbers, followed by manual verification via micro-deposits after a day or two. There was no instant linking option via login information.

After deposit verification, then your funding will go through.

You have successfully verified your external account. Please allow up to 5 business days for your funds to appear in your CIT Bank account.
No further action is required for this account. Thank you!

User interface. While the front-facing website is pretty slick, after you login the backend is run by Fidelity National Information Services (subdomain ibanking-services.com). This is a popular backend software system used by many smaller banks who don’t want to create their own software from scratch. It’s functional, but not very pretty. At least it’s familiar to someone like me who has too many bank accounts. Two-factor authentication is available using voice or SMS.

Best Interest Rates on Cash – October 2017

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Interest rates are slowly waking up from their multi-year slumber. Don’t let a megabank pay you 0.01% APY or less for your idle cash. Here is my monthly roundup of the best safe rates available, roughly sorted from shortest to longest maturities. I focus on rates that are nationally available to everyone (not restricted to certain geographic areas or specific groups). Rates checked as of 10/2/17.

High-yield savings accounts
While the huge brick-and-mortar banks rarely offer good yields, there are many online savings accounts offering competitive rates clustered around 1.0%-1.2% APY. Remember that with savings accounts, the interest rates can change at any time.

  • The Mega Money Market accounts of both Redneck Bank and All America Bank (they are affiliated) are paying 1.50% APY on balances up to $35,000. Note that amounts over $35,000 earn only 0.50% APY.
  • Other sample top rates: DollarSavingsDirect at 1.40% APY, CIT Bank at 1.35% APY up to $250k, Synchrony Bank at 1.30% APY, Goldman Bank at 1.20% APY, and UFB Direct at 1.41% APY ($5k min).
  • I’ve experienced the “bait-and-switch” of moving to a new bank only to have the rate lowered quickly afterward. Until the rate difference is huge, I’m sticking with a Ally Bank Savings + Checking combo due to their history of competitive rates (including CDs), 1-day interbank transfers, and a overall user experience. I also like the free overdraft transfers from savings that let’s me keep my checking balance at a minimum. Ally Savings is at 1.20% APY.

Money market mutual funds + Ultra-short bond ETFs
If you like to keep cash in a brokerage account, you should know that money market and short-term Treasury rates have inched upwards. It may be worth the effort to move your money into a higher-yielding money market fund or ultrashort-term bond ETF.

  • The Vanguard Prime Money Market Fund currently pays an 1.12% SEC yield. The default sweep option is the Vanguard Federal Money Market Fund, which has an SEC yield of 0.98%. You can manually move the money over to Prime if you meet the $3,000 minimum investment.
  • Vanguard Ultra-Short-Term Bond Fund currently pays 1.46% SEC Yield ($3,000 min) and 1.57% SEC Yield ($50,000 min). The current average effective duration is 1.0 years.
  • The following bond ETFs are not FDIC-insured, but if you want to keep “standby money” in your brokerage account and have cheap/free trades, it may be worth a look. The PIMCO Enhanced Short Maturity Active Bond ETF (MINT) has a 1.58% SEC yield and the iShares Short Maturity Bond ETF (NEAR) has a 1.60% SEC yield while holding a portfolio of investment-grade bonds with an average duration of ~6 months. More info here.

Short-term guaranteed rates (1 year and under)
I am often asked what to do with a big wad of cash that you’re waiting to deploy shortly (just sold your house, just sold your business, legal settlement, inheritance). My standard advice is to keep things simple. If not a savings account, then put it in a short-term CD under the FDIC limits until you have a plan.

  • Ally Bank No-Penalty 11-Month CD is paying 1.50% APY for $25,000+ balances and 1.25% APY for $5,000+ balances. The CIT Bank 11-Month No-Penalty CD is at 1.45% APY with only a $1,000 minimum deposit and no withdrawal penalty seven days or later after funds have been received. The lack of early withdrawal penalty means that your interest rate can never go down for 11 months, but you can always jump ship if rates rise.
  • Advancial Federal Credit Union has a 6-month CD at 1.63% APY ($50k min) and a 12-month CD at 1.78% APY ($50k min). If you don’t otherwise qualify, you can join with a $5 fee to Connex Professional Network and maintaining $5 in a Share savings account. Via DepositAccounts.

US Savings Bonds
Series I Savings Bonds offer rates that are linked to inflation and backed by the US government. You must hold them for at least a year. There are annual purchase limits. If you redeem them within 5 years there is a penalty of the last 3 months of interest.

  • “I Bonds” bought between May and October 2017 will earn a 1.96% rate for the first six months, and then a variable rate based on ongoing inflation after that. While that next 6-month rate is currently unknown, at the very minimum the total yield after 12 months will around 1% with additional upside potential. More info here.
  • In mid-October, the CPI will be announced and you will have a short period where you will have a very close estimate of the rate for the next 12 months. I will have another post up at that time.

Prepaid Cards with Attached Savings Accounts
A small subset of prepaid debit cards have an “attached” FDIC-insured savings account with high interest rates. The negatives are that balances are capped, and there are many fees that you must be careful to avoid (lest they eat up your interest). The other catch is that these good features may be killed off without much notice. My NetSpend card now only has an eligible balance up to $1,000.

  • Insight Card is one of the best remaining cards with 5% APY on up to $5,000 as of this writing. Fees to avoid include the $1 per purchase fee, $2.50 for each ATM withdrawal, and the $3.95 inactivity fee if there is no activity within 90 days. If you can navigate it carefully (basically only use ACH transfers and keep up your activity regularly) you can still end up with more interest than other options. Earning 4% extra interest on $5,000 is $200 a year.

Rewards checking accounts
These unique checking accounts pay above-average interest rates, but with some risk. You have to jump through certain hoops, and if you make a mistake you won’t earn any interest for that month. Rates can also drop quickly, leaving a “bait-and-switch” feeling. But the rates can be high while they last.

  • Northpointe Bank has Rewards Checking at 5% APY on up to $10k. The requirements are (1) 15 debit card purchases per month (in-person or online), (2) enrolling in e-statements, and (3) a monthly direct deposit or automatic withdrawal of $100 or more. ATM fees are rebated up to $10 per month.

Certificates of deposit (greater than 1 year)
You might have larger balances, either because you are using CDs instead of bonds or you simply want a large cash cushion. Buying finding a bank CD with a reasonable early withdrawal penalty, you can enjoy higher rates but maintain access in a true emergency. Alternatively, consider a custom CD ladder of different maturity lengths such that you have access to part of the ladder each year, but your blended interest rate is higher than a savings account.

  • Advancial Federal Credit Union (see above) has increased their rates a bit since last month, with their 18-month CD at 1.96% APY ($50k min) and a 24-month CD at 2.04% APY ($50k min). The early withdrawal penalty is 180 days of interest.
  • Ally Bank also has a 5-year CD at 2.25% APY (no minimum) with a relatively short 150-day early withdrawal penalty and no credit union membership hoops. For example, if you closed this CD after 18-months you’d still get an 1.64% effective APY even after accounting for the penalty.
  • Hanscom Federal Credit Union is offering a 4-year Share Certificate at 2.50% APY (180-day early withdrawal penalty) if you also have Premier Checking (no monthly fee if you keep $6,000 in total balances or $2,000 in checking). HFCU also offers a 3% APY CU Thrive “starter” savings account with balance caps. HFCU membership is open to active/retired military or anyone who makes a one-time $35 donation to the Nashua River Watershed Association.
  • Mountain America Credit Union has a 5-year Share Certificate rate at 2.60% APY ($5 minimum) with a 365-day early withdrawal penalty. Anyone can join this credit union via partner organization American Consumer Council for a one-time $5 fee.

Longer-term Instruments
I’d use these with caution, but I still track them to see the rest of the current yield curve.

  • Willing to lock up your money for 10+ years? You can buy certificates of deposit via the bond desks of Vanguard and Fidelity. These “brokered CDs” offer the same FDIC-insurance. As of this writing, Vanguard is showing a 10-year non-callable CD at 2.65% APY (Watch out for higher rates from callable CDs.) Unfortunately, current long-term CD rates do not rise much higher even as you extend beyond a 5-year maturity.
  • How about two decades!? Series EE Savings Bonds are not indexed to inflation, but they have a guarantee that the value will double in value in 20 years, which equals a guaranteed return of 3.5% a year. However, if you don’t hold for that long, you’ll be stuck with the normal rate which is quite low (currently a sad 0.10% rate). You could view as a huge early withdrawal penalty. You could also view it as long-term bond and thus a hedge against deflation, but only if you can hold on for 20 years. Too long for me.

All rates were checked as of 10/2/17.


Premier High Yield Savings

Practical Advice on Identity Theft and Removing Unauthorized Accounts

bankshowerThe boilerplate advice I keep reading at the end of every article about the Equifax hack is… Everybody freeze their credit! That certainly is an option, but perhaps it might be overkill to expect 150 million people to do that? The credit reporting agencies seem to make it an painful experience on purpose, charging you $10 a pop x 3 bureaus for freezing/thawing. Some good news: Equifax just announced a new free instant lock/unlock feature, which probably wouldn’t have happened if it wasn’t for this breach.

For a more practical perspective, I recommend bookmarking the post Identity Theft, Credit Reports, and You by Patrick McKenzie. He has real-world experience in helping others deal with the credit bureaus and navigating the Fair Credit Reporting Act (FCRA). My notes:

  • You don’t need to do anything just because your data was leaked or might have been leaked and nothing has actually happened.
  • Don’t pay money for credit monitoring.
  • If you find unauthorized charges on an credit card you opened yourself, just call your bank or card issuer. This shouldn’t be a big headache.
  • If you find an account NOT opened by yourself, either due to fraud or some sort of clerical error, then read the entire post for detailed instructions. You need to create a paper trail because this could easily turn into a big headache.

A lot of nuance is covered and sample text is helpfully included, such as:

On August 5th, 20XX I accessed my credit report from Experian, numbered 1234567. It shows an account with your institution in my name, with account number XXX123. I am unaware of the full account number. I have no knowledge of this account. I did not open it or authorize anyone to open it.

Please correct this tradeline and confirm this to me in writing within the timeframe specified by law. If you cannot correct this tradeline, provide me with your written justification for why your investigation concluded that this tradeline was accurate.

Here are some important things to note if you have to deal directly with a financial institution regarding an unauthorized account:

  • Do not call. Communicate only via written letters sent by postal mail to their official address. Create a paper trail. Keep a scan/copy of everything.
  • Never pay debt which isn’t yours, even if you are being harassed.
  • Never speak to debt collectors on the phone, either. Just ask for their address and hang up so you can communicate in writing. You are not breaking any laws if you hang up on them.
  • You can do this. In his experience, most issues were resolved after 2-3 letters send via certified mail/return receipt.

Best Interest Rates on Cash Savings – September 2017

percentage2

Interest rates are slowly waking up from their multi-year slumber, so I’m paying closer attention to the various changes each month. Don’t let a megabank pay you 0.01% APY or less for your idle cash. Here is my monthly roundup of the best safe rates available, roughly sorted from shortest to longest maturities. Rates checked as of 9/4/17.

High-yield savings accounts
While the huge brick-and-mortar banks rarely offer good yields, there are many online savings accounts offering competitive rates clustered around 1.0%-1.2% APY. Remember that with savings accounts, the interest rates can change at any time.

  • The Mega Money Market accounts of both Redneck Bank and All America Bank (they are affiliated) are paying 1.50% APY on balances up to $35,000. Note that amounts over $35,000 earn only 0.50% APY.
  • Other sample top rates without a balance cap: DollarSavingsDirect at 1.40% APY, Synchrony Bank and Goldman Sachs Bank are at 1.20% APY. Notice that BankDirect was 1.35% APY last month, but today is now only 0.15% APY! Boo.
  • As I’ve been “bait-and-switched” a few times myself, I’m still sticking with my Ally Bank Savings + Checking combo due to their history of competitive rates (including CDs), 1-day interbank transfers, and a overall user experience. I also like the free overdraft transfers from savings that let’s me keep my checking balance at a minimum. Ally Savings is at 1.20% APY.

Money market mutual funds + Ultra-short bond ETFs
If you like to keep cash in a brokerage account, you should know that money market and short-term Treasury rates have inched upwards. It may be worth the effort to move your money into a higher-yielding money market fund or ultrashort-term bond ETF.

  • The Vanguard Prime Money Market Fund has increased their SEC yield now to 1.10%. The default sweep option is the Vanguard Federal Money Market Fund, which only has an SEC yield of 0.97%. You can manually move the money over to Prime if you meet the $3,000 minimum investment.
  • The following bond ETFs are not FDIC-insured, but if you want to keep “standby money” in your brokerage account and have cheap/free trades, it may be worth a look. The PIMCO Enhanced Short Maturity Active Bond ETF (MINT) has a 1.55% SEC yield and the iShares Short Maturity Bond ETF (NEAR) has a 1.57% SEC yield while holding a portfolio of investment-grade bonds with an average duration of ~6 months. More info here.

Short-term guaranteed rates (1 year and under)
I am often asked what to do with a big wad of cash that you’re waiting to deploy shortly (just sold your house, just sold your business, legal settlement, inheritance). My standard advice is to keep things simple. If not a savings account, then put it in a short-term CD under the FDIC limits until you have a plan.

  • Ally Bank No-Penalty 11-Month CD is paying 1.50% APY for $25,000+ balances and 1.25% APY for $5,000+ balances. The lack of early withdrawal penalty means that your interest rate can never go down for 11 months, but you can always jump ship if rates rise.
  • Advancial Federal Credit Union has a 6-month CD at 1.63% APY ($50k min) and a 12-month CD at 1.78% APY ($50k min). If you don’t otherwise qualify, you can join this credit union with a $5 fee to Connex Professional Network and maintaining $5 in a Share savings account. Via DepositAccounts.

US Savings Bonds
Series I Savings Bonds offer rates that are linked to inflation and backed by the US government. You must hold them for at least a year. There are annual purchase limits. If you redeem them within 5 years there is a penalty of the last 3 months of interest.

  • “I Bonds” bought between May and October 2017 will earn a 1.96% rate for the first six months, and then a variable rate based on ongoing inflation after that. While that next 6-month rate is currently unknown, at the very minimum the total yield after 12 months will around 1% with additional upside potential. More info here.
  • In mid-October, the CPI will be announced and you will have a short period where you will have a very close estimate of the rate for the next 12 months. I will have another post up at that time.

Prepaid Cards with Attached Savings Accounts
A small subset of prepaid debit cards have an “attached” FDIC-insured savings account with high interest rates. The negatives are that balances are capped, and there are many fees that you must be careful to avoid (lest they eat up your interest). The other catch is that these good features may be killed off without much notice. My NetSpend card now only has an eligible balance up to $1,000.

  • Insight Card is one of the best remaining cards with 5% APY on up to $5,000 as of this writing. Fees to avoid include the $1 per purchase fee, $2.50 for each ATM withdrawal, and the $3.95 inactivity fee if there is no activity within 90 days. If you can navigate it carefully (basically only use ACH transfers and keep up your activity regularly) you can still end up with more interest than other options. Earning 4% extra interest on $5,000 is $200 a year.

Rewards checking accounts
These unique checking accounts pay above-average interest rates, but with some risk. You have to jump through certain hoops, and if you make a mistake you won’t earn any interest for that month. Rates can also drop quickly, leaving a “bait-and-switch” feeling. But the rates can be high while they last.

  • Northpointe Bank has Rewards Checking at 5% APY on up to $10k. The requirements are (1) 15 debit card purchases per month (in-person or online), (2) enrolling in e-statements, and (3) a monthly direct deposit or automatic withdrawal of $100 or more. ATM fees are rebated up to $10 per month.

Certificates of deposit (greater than 1 year)
You might have larger balances, either because you are using CDs instead of bonds or you simply want a large cash cushion. Buying finding a bank CD with a reasonable early withdrawal penalty, you can enjoy higher rates but maintain access in a true emergency. Alternatively, consider a custom CD ladder of different maturity lengths such that you have access to part of the ladder each year, but your blended interest rate is higher than a savings account.

  • Advancial Federal Credit Union (see above) has an 18-month CD at 1.89% APY ($50k min) and a 24-month CD at 2.00% APY ($50k min). The early withdrawal penalty is 180 days of interest.
  • Ally Bank also has a 5-year CD at 2.25% APY (no minimum) with a relatively short 150-day early withdrawal penalty and no credit union membership hoops. For example, if you closed this CD after 18-months you’d still get an 1.64% effective APY even after accounting for the penalty.
  • Hanscom Federal Credit Union is offering a 4-year Share Certificate at 2.50% APY (180-day early withdrawal penalty) if you also have Premier Checking (no monthly fee if you keep $6,000 in total balances or $2,000 in checking). HFCU also offers a 3% APY CU Thrive “starter” savings account with balance caps. HFCU membership is open to active/retired military or anyone who makes a one-time $35 donation to the Nashua River Watershed Association.
  • Mountain America Credit Union is offering a 5-year Share Certificate at 2.60% APY ($5 minimum) with a 365-day early withdrawal penalty. Anyone can join this credit union via partner organization American Consumer Council for a one-time $5 fee.

Longer-term Instruments
I’d use these with caution, but I still track them to see the rest of the current yield curve.

  • Willing to lock up your money for 10+ years? You can buy certificates of deposit via the bond desks of Vanguard and Fidelity. These “brokered CDs” offer the same FDIC-insurance. As of this writing, Vanguard is showing a 10-year non-callable CD at 2.65% APY (Watch out for higher rates from callable CDs.) Unfortunately, current long-term CD rates do not rise much higher even as you extend beyond a 5-year maturity.
  • How about two decades!? Series EE Savings Bonds are not indexed to inflation, but they have a guarantee that the value will double in value in 20 years, which equals a guaranteed return of 3.5% a year. However, if you don’t hold for that long, you’ll be stuck with the normal rate which is quite low (currently a sad 0.10% rate). You could view as a huge early withdrawal penalty. You could also view it as long-term bond and thus a hedge against deflation, but only if you can hold on for 20 years. Too long for me.

All rates were checked as of 9/4/17.

Discover Bank: 1.15% APY + $150/$200 Bonus ($15,000/$20,000 Deposit)

disc_osaDiscover Bank is offering a refreshingly straightforward bonus for their online savings account. If you open a new account through this promotion link by 10/2/17 and use the offer code S817, you can receive one of the following bonuses:

  • Deposit a total of at least $15,000 into your account by 10/16/17 to earn a $150 bonus, or
  • Deposit a total of at least $20,000 into your account by 10/16/17 to earn a $200 bonus.

The Discover Online Savings Account has a yield of 1.15% APY as of 8/27/17, which is a competitive rate although not the absolute highest available. There are no minimum balance requirements and no monthly fees. Interest is compounded daily and paid monthly.

If you deposit the minimum amount of $15k or $20k, you effectively get a bonus of another 1% of your initial deposit. However, there is no minimum time period where you have to keep the money there after getting the bonus, so your effective ROI can be quite high.

Offer not valid for existing or prior Discover savings customers. Account must be open when bonus is credited. Bonus will be credited to the account by 10/31/17. Bonus is considered interest and will be reported on IRS Form 1099-INT. Offer may be modified/withdrawn without notice.

I already have a Discover bank account that I tried out in exchange for another bonus. The rates are decent and they are low hassle, so I keep it open in case something good comes up in the future. I keep $5 in there so they don’t close it without notice.

GiftsforBanking CD Review: 2-Year CD at 1.85% APY + Gift Valued Up to ~1% APY

applewGiftsforBanking.com has a unique FDIC-insured certificate of deposit that pays out a mix of traditional cash interest and a physical gift. The underlying bank is GObanking.com, which is in turn a division of Flushing Bank. Via DepositAccounts, they just upped their 2-Year CD to a competitive 1.85% APY of cash interest, plus a choice of gifts based on your deposit amount:

In the perfect scenario, you open a 2-year CD with $25,000 (or $50,000) and get 1.85% APY plus a gift worth another 1% APY. (Ex. $25,000 x 1% APY = $250 per year. For 2 years = $500 total.) A theoretical 2-year CD paying 2.85% APY (or even 2.5% APY) would be a top available rate in the current market.

However, it is important to note the following fine print:

*Annual Percentage Yield. APYs are effective as of 8/18/17 and are subject to change without notice. There is a substantial penalty for early withdrawals, including the value of the gift chosen. The value of all gifts will be considered as interest on your account for tax purposes in the first year the account is opened. A 1099-INT statement for the value of the gift (including applicable sales tax, shipping and handling costs) will be issued for the year of gift redemption. Please allow up to three weeks from the time that you place your gift order for delivery of gifts. Photos of gifts may not be exact model. GiftsforBanking.com reserves the right to make gift substitutions of comparable value and assumes no liability for any defects in, or consequential damages relating to gift items. The warranty is the sole responsibility of the manufacturer. CD Reward codes will expire twelve (12) months from the date that the code is first emailed to you.

This brings up the following concerns:

  • You will receive a 1099-INT for the cash interest and the value of the gift (including applicable sales tax, shipping and handling costs). It is unclear exactly what this number is for each specific gift option. It is traditionally the MSRP, but sometimes even that number is hard to figure out. How much extra will they tack on for shipping and handling? In the end, you could be on the hook for taxes on a amount significantly higher than the actual resale value. (Update: Commenter David reports that the $25k/$50k tier gifts will have a 1099 value of $575/$1,100 respectively.) You could try to dispute this amount but is it really worth the trouble?
  • The early withdrawal penalty includes both 6 months of interest plus the value of the gift. That is a relatively heavy penalty.
  • There is a minimum opening balance of $25,000 for each CD.
  • Why does the website look like it traveled in time from 1999?

The good news is that 1.85% APY on a 2-year CD all by itself is a pretty competitive rate. So if you wanted, you could simply consider the additional gift “interest” as a special discount. Instead of paying say $360 for an Apple Watch from Amazon and $80-$95 for a $100 iTunes Gift Card, you might only have to pay income taxes on $500 or so. The key is whether you actually wanted to buy a 2-year CD anyway, either for your cash reserves or as a bond replacement. For comparison, right now a 2-year US Treasury bond only yields 1.32%.

Bottom line. This is a quirky bank CD promotion with the potential to be a good deal, but some important things have to align. You already want a 2-year bank CD. You should be quite confident you won’t withdraw early. You can get good value out of the gift options or are willing to resell. Is the potential extra value worth the added hassle?

Best Interest Rates on Cash Savings – August 2017

percentage2

Interest rates are slowly waking up from their multi-year slumber, so I’m paying closer attention to the various changes each month. Don’t let a megabank pay you 0.01% APY or less for your idle cash. Here is my monthly roundup of the best safe rates available, roughly sorted from shortest to longest maturities. Rates checked as of 8/1/17.

High-yield savings accounts
While the huge brick-and-mortar banks rarely offer good yields, the online banks with a history of competitive rates offer online savings accounts clustered 1.0%-1.2% APY. Remember that with savings accounts, the interest rates can change at any time.

  • The Mega Money Market accounts of both Redneck Bank and All America Bank (they are affiliated) are paying 1.50% APY on balances up to $35,000. Note that amounts over $35,000 earn only 0.50% APY.
  • Other sample top rates without a balance cap: DollarSavingsDirect at 1.40% APY, BankDirect at 1.35% APY, Synchrony Bank and Goldman Sachs Bank are at 1.20% APY.
  • As I’ve been “bait-and-switched” a few times, I’m still sticking with my Ally Bank Savings + Checking combo due to their history of competitive rates (including CDs), 1-day interbank transfers, and a overall user experience. I also like the free overdraft transfers from savings so I can keep my checking balance at a minimum. Ally Savings is at 1.15% APY.

Money market mutual funds + Ultra-short bond ETFs
If you like to keep cash in a brokerage account, you should know that money market and short-term Treasury rates have been inching upwards. It may be worth the effort to move your money into a higher-yielding money market fund or ultrashort-term bond ETF.

  • The Vanguard Prime Money Market Fund has increased their SEC yield now to 1.10%. The default sweep option is the Vanguard Federal Money Market Fund, which only has an SEC yield of 0.92%. You can manually move the money over to Prime if you meet the $3,000 minimum investment.
  • The following bond ETFs are not FDIC-insured, but if you want to keep “standby money” in your brokerage account and have cheap/free trades, it may be worth a look. The PIMCO Enhanced Short Maturity Active Bond ETF (MINT) has a 1.52% SEC yield and the iShares Short Maturity Bond ETF (NEAR) has a 1.52% SEC yield while holding a portfolio of investment-grade bonds with an average duration of ~6 months. More info here.

Short-term guaranteed rates (under 1 year)
I am often asked what to do with a big wad of cash that you’re waiting to deploy shortly (just sold your house, just sold your business, legal settlement, inheritance). Honestly, I wouldn’t get fancy or take unnecessary risk. Just keep it safe in a short-term CD or online savings account that in insured under the FDIC limits until you have a plan.

  • The Ally Bank No-Penalty 11-Month CD is now paying 1.50% APY for $25,000+ balances and 1.25% APY for $5,000+ balances. The lack of early withdrawal penalty means that your interest rate can never go down for 11 months, but you can still jump ship if rates rise.
  • Salem Five Direct is advertising 1.25% APY on balances up to $500,000. The good news is that this rate is guaranteed until 7/1/18 – more than a year away – and since it is a savings account you can still move your money in and out without penalty. The bad news is that this rate is for new customers only.

US Savings Bonds
Series I Savings Bonds offer rates that are linked to inflation and backed by the US government. You must hold them for at least a year. There are annual purchase limits. If you redeem them within 5 years there is a penalty of the last 3 months of interest.

  • “I Bonds” bought between May and October 2017 will earn a 1.96% rate for the first six months, and then a variable rate based on ongoing inflation after that. While that next 6-month rate is currently unknown, at the very minimum the total yield after 12 months will around 1% with additional upside potential. More info here.
  • In mid-October, the CPI will be announced and you will have a short period where you will have a very close estimate of the rate for the next 12 months. I will have another post up at that time.

Prepaid Cards with Attached Savings Accounts
A small subset of prepaid debit cards have an “attached” FDIC-insured savings account with high interest rates. The risks are that balances are capped, and there are many fees that you must be careful to avoid (lest they eat up your interest). The other catch is that these good features may be killed off without much notice. My NetSpend card now only has an eligible balance up to $1,000.

  • Insight Card is one of the best remaining cards with 5% APY on up to $5,000 as of this writing. Fees to avoid include the $1 per purchase fee, $2.50 for each ATM withdrawal, and the $3.95 inactivity fee if there is no activity within 90 days. If you can navigate it carefully (basically only use ACH transfers and keep up your activity regularly) you can still end up with more interest than other options. Earning 4% extra interest on $5,000 is $200 a year.

Rewards checking accounts
These unique checking accounts pay above-average interest rates, but with some risk. You have to jump through certain hoops, and if you make a mistake you won’t earn any interest for that month. Rates can also drop quickly, leaving a “bait-and-switch” feeling. But the rates can be high while they last.

  • Northpointe Bank has Rewards Checking at 5% APY on up to $10k. The requirements are (1) 15 debit card purchases per month (in-person or online), (2) enrolling in e-statements, and (3) a monthly direct deposit or automatic withdrawal of $100 or more. ATM fees are rebated up to $10 per month.

Certificates of deposit
If you have a large cushion, it’s quite likely to just sit there for years. One option is to keep your money in longer-term investments where you can still take it out in a true emergency and pay a reasonable early withdrawal penalty. Alternatively, you could create a CD ladder of different maturity lengths such that you have access to part of the ladder each year, but your blended interest rate is higher than a savings account.

  • AmboyDirect has a 12-month CD at 1.65% APY if you deposit $10,000. Additional deposits can be made within 6 months of account opening. Note that early withdrawal penalty is a hefty 6-months of interest, however. If asked, provide offer code 601611.
  • Ally Bank also has a 5-year CD at 2.25% APY with a relatively short 150-day early withdrawal penalty and no credit union membership hoops. For example, if you closed this CD after 18-months you’d still get an 1.64% effective APY even after accounting for the penalty.
  • Hanscom Federal Credit Union is offering a 4-year Share Certificate at 2.50% APY (180-day early withdrawal penalty) if you also have Premier Checking (no monthly fee if you keep $6,000 in total balances or $2,000 in checking). HFCU also offers a 3% APY CU Thrive “starter” savings account. HFCU membership is open to active/retired military or anyone who makes a one-time $35 donation to the Nashua River Watershed Association.
  • Mountain America Credit Union is offering a 5-year Share Certificate at 2.60% APY (365-day early withdrawal penalty). $500 minimum deposit. Anyone can join this credit union via partner organization American Consumer Council for a one-time $5 fee.

Longer-term Instruments
I’d use these with caution, but I still track them to see the rest of the current yield curve.

  • Willing to lock up your money for 10+ years? You can buy certificates of deposit via the bond desks of Vanguard and Fidelity. These “brokered CDs” offer the same FDIC-insurance. As of this writing, Vanguard is showing a 10-year non-callable CD at 2.65% APY (Watch out for higher rates from callable CDs.) Unfortunately, current long-term CD rates do not rise much higher even as you extend beyond a 5-year maturity.
  • How about two decades!? Series EE Savings Bonds are not indexed to inflation, but they have a guarantee that the value will double in value in 20 years, which equals a guaranteed return of 3.5% a year. However, if you don’t hold for that long, you’ll be stuck with the normal rate which is quite low (currently a sad 0.10% rate). You could view as a huge early withdrawal penalty. You could also view it as long-term bond and thus a hedge against deflation, but only if you can hold on for 20 years. Too long for me.

All rates were checked as of 8/1/17.

Best Interest Rates on Cash Savings – July 2017

percentage2

Interest rates are slowly waking up from their multi-year slumber, so I am paying a bit more attention to the various changes each month. Don’t let a megabank pay you 0.01% APY or less for your idle cash. Here is my monthly roundup of the best safe rates available, roughly sorted from shortest to longest maturities. Rates checked as of 7/4/17.

High-yield savings accounts
While the huge brick-and-mortar banks rarely offer good yields, the online banks with a history of competitive rates offer online savings accounts clustered around 1% APY. Remember that with savings accounts, the interest rates can change at any time.

  • As I’ve been “bait-and-switched” a few times, I try to stick with savings accounts that have a consistent history of competitive rates and a good user experience. My favorite is currently Ally Bank Online Savings, which recently bumped their rate to 1.15% APY.
  • The Mega Money Market accounts of both Redneck Bank and All America Bank (they are affiliated) are paying 1.50% APY on balances up to $35,000. Note that amounts over $35,000 earn only 0.50% APY.

Money market mutual funds + Ultra-short bond ETFs
If you like to keep cash in a brokerage account, you should know that money market and short-term Treasury rates have been inching upwards. It may be worth the effort to move your money into a higher-yielding money market fund or ultrashort-term bond ETF.

  • The Vanguard Prime Money Market Fund has increased their SEC yield now to 1.07%. The default sweep option is the Vanguard Federal Money Market Fund, which only has an SEC yield of 0.87%. You can manually move the money over to Prime if you meet the $3,000 minimum investment.
  • The following bond ETFs are not FDIC-insured, but if you want to keep “standby money” in your brokerage account and have cheap/free trades, it may be worth a look. The PIMCO Enhanced Short Maturity Active Bond ETF (MINT) has a 1.49% SEC yield and the iShares Short Maturity Bond ETF (NEAR) has a 1.53% SEC yield while holding a portfolio of investment-grade bonds with an average duration of ~6 months. More info here.

Short-term guaranteed rates (under 1 year)
I am often asked what to do with a big wad of cash that you’re waiting to deploy shortly (just sold your house, just sold your business, inheritance). Honestly, I wouldn’t get fancy or take unnecessary risk. Just keep it safe in a short-term CD or online savings account that in insured under the FDIC limits until you have a plan.

  • The Ally Bank No-Penalty 11-Month CD is now paying 1.50% APY for $25,000+ balances and 1.25% APY for $5,000+ balances. The lack of early withdrawal means that you can your interest rate can never go down for 11 months, but you can still jump ship if rates rise.
  • Salem Five Direct is advertising 1.25% APY on balances up to $500,000. The good news is that this rate is guaranteed until 7/1/18 – more than a year away – and since it is a savings account you can still move your money in and out without penalty. The bad news is that this rate is for new customers only.

US Savings Bonds
Series I Savings Bonds offer rates that are linked to inflation and backed by the US government. You must hold them for at least a year. There are annual purchase limits. If you redeem them within 5 years there is a penalty of the last 3 months of interest.

  • “I Bonds” bought between May and October 2017 will earn a 1.96% rate for the first six months, and then a variable rate based on ongoing inflation after that. While that next 6-month rate is currently unknown, at the very minimum the total yield after 12 months will around 1% with additional upside potential. More info here.
  • In mid-October, the CPI will be announced and you will have a short period where you will have a very close estimate of the rate for the next 12 months. I will have another post up at that time.

Prepaid Cards with Attached Savings Accounts
A small subset of prepaid debit cards have an “attached” FDIC-insured savings account with high interest rates. The risks are that balances are capped, and there are many fees that you must be careful to avoid (lest they eat up your interest). The other catch is that these good features may be killed off without much notice. My NetSpend card now only has an eligible balance up to $1,000.

  • Insight Card is one of the best remaining cards with 5% APY on up to $5,000 as of this writing. Fees to avoid include the $1 per purchase fee, $2.50 for each ATM withdrawal, and the $3.95 inactivity fee if there is no activity within 90 days. If you can navigate it carefully (basically only use ACH transfers and keep up your activity regularly) you can still end up with more interest than other options. Earning 4% extra interest on $5,000 is $200 a year.

Rewards checking accounts
These unique checking accounts pay above-average interest rates, but with some risk. You have to jump through certain hoops, and if you make a mistake you won’t earn any interest for that month. Rates can also drop quickly, leaving a “bait-and-switch” feeling. But the rates can be high while they last.

  • Consumers Credit Union offers up to 4.59% APY on up to a $20k balance, although 3.09% APY on a $10k balance is more realistic unless you satisfy a long list of requirements. Note that the 4.59% APY requires you to apply and get approved for an additional credit card through them (other credit cards offer $500+ in sign-up bonuses) and also spend $1,000 on it every month. Keep your 12 debit purchases small as well, as for every $500 in monthly purchases you may be losing out on 2% cashback (or $10 a month on after-tax benefit). Find a local rewards checking account at DepositAccounts.

Certificates of deposit
If you have a large cushion, it’s quite likely to just sit there for years. One option is to keep your money in longer-term investments where you can still take it out in a true emergency and pay a reasonable early withdrawal penalty. Alternatively, you could create a CD ladder of different maturity lengths such that you have access to part of the ladder each year, but your blended interest rate is higher than a savings account.

  • Connexus Credit Union is offering a 1-year Share Certificate at 1.50% APY (90-day early withdrawal penalty) and a 3-year Share Certificate (180-day early withdrawal penalty) at 2.00% APY. Both have a $5,000 minimum deposit. Anyone can join this credit union via partner organization Connexus Association for a one-time $5 fee.
  • Hanscom Federal Credit Union is offering a 4-year Share Certificate at 2.50% APY (180-day early withdrawal penalty) if you also have Premier Checking (no monthly fee if you keep $6,000 in total balances or $2,000 in checking). HFCU also offer a 3% APY CU Thrive “starter” savings account. HFCU membership is open to active/retired military or anyone who makes a one-time $35 donation to the Nashua River Watershed Association.
  • Ally Bank also has a 5-year CD at 2.25% APY with a relatively short 150-day early withdrawal penalty and no credit union membership hoops. For example, if you closed this CD after 18-months, you can get a 1.64% effective APY even after accounting for the penalty.

Longer-term Instruments
I’d use these with caution, but I still track them to see the rest of the current yield curve.

  • Willing to lock up your money for 10+ years? You can buy certificates of deposit via the bond desks of Vanguard and Fidelity. These “brokered CDs” offer the same FDIC-insurance. As of this writing, Vanguard is showing a 10-year non-callable CD at 2.60% APY (2.70% if you log into Fidelity). (Unfortunately, current long-term CD rates do not rise much higher even as you extend beyond a 5-year maturity.) Prices will vary daily.
  • How about two decades!? Series EE Savings Bonds are not indexed to inflation, but they have a guarantee that the value will double in value in 20 years, which equals a guaranteed return of 3.5% a year. However, if you don’t hold for that long, you’ll be stuck with the normal rate which is quite low (currently a sad 0.10% rate). You could view as a huge early withdrawal penalty. You could also view it as long-term bond and thus a hedge against deflation, but only if you can hold on for 20 years. Too long for me.

All rates were checked as of 7/4/17.

Does Cash Make You Happier Than Income or Paying Down Debt?

happyfaceThe growing appreciation of behavioral psychology in investing is basically us admitting that we aren’t perfectly rational. When you make people automatically opt-in to 401(k) plans and make their contributions increase automatically, they save more. We value stocks more simply because we own them (“endowment effect”). We hate losing money more than we enjoy winning (“loss aversion”).

A recent research paper tells us (in my own words) that having liquid cash has a stronger correlation effect to happiness than having a bigger retirement portfolio, a higher income, or paying down your debt. This is coming from the NYT article Yes, Numbers Matter in Money Decisions, but So Do Emotions linking to the Kitces post Buying Happiness And Life Satisfaction With Greater Cash-On-Hand Reserves linking to academic paper How Your Bank Balance Buys Happiness: The Importance of “Cash on Hand” to Life Satisfaction. Here’s the abstract:

Our results suggest that having a buffer of money available in checking and savings accounts confers a sense of financial security, which in turn is associated with greater life satisfaction. The strength of this association was comparable to the effect of investments—which may themselves be liquid assets (e.g., money market accounts)—and slightly greater than the effect of debt status. By contrast, higher income and spending—the amounts going into or out of a person’s bank account—were not associated with increased financial well-being after liquid wealth was included in the model. This finding suggests that people with low liquid account balances may feel more economically distressed—and thus less satisfied with their lives—than their peers with higher balances, even if their incomes and spending, considered separately from their account balances, would predict high financial security.

Michael Kitces took the numbers from the paper and created this useful graphic:

cashlife

I dug up some more specific numbers from the paper:

To put our results into context, we found that going from having £1 to having £1,000 (a 3-log increase) in one’s bank accounts each month—not rags-to-riches, but merely rags-to-sufficiency—is associated with an average gain of 2 points (10% of a 20-point scale) in life satisfaction by virtue of feeling more secure about one’s finances. However, because liquid wealth was log transformed, further increasing liquid assets from £1,000 to £10,000 (a 1-log increase) was associated with an expected increase of just 0.7 further points on the same scale.

There are diminishing returns with accumulating cash reserves past a certain size. Going from $1 to ~$1,500 in your bank account improves your life satisfaction more than twice as much as going from ~$1,500 to ~$15,000.

This is similar to the findings that happiness increases with higher income until $60,000 to $75,000 per year. Above that level, happiness still increases but at a much lower rate.

On a certain level, this is common sense. Having a hunk of cash available for emergencies should make you feel more secure. However, in purely mathematical terms you should feel the same if you put $1,500 into your retirement account or if you paid down $1,500 of debt. Money is fungible. But your mind doesn’t necessarily agree, and perhaps it is better to work within that bias rather than fight it.

Bottom line. It may not be rational, but putting money towards a modest cash cushion can make you happier than putting every last penny towards paying down debt or your 401(k) retirement account. After a certain point this “cash is king” effect diminishes. (I might carve out an exception for 401(k) matches that effectively double your money at no risk.)

Ally Bank 11-Month No Penalty CD at 1.50% APY for $25k+, 1.25% APY for $5k+

ally11

Ally Bank raised the rate on their 11-month No Penalty CD. Here are the new interest rates under their tiered structure:

  • 1.50% APY at $25,000 minimum opening deposit
  • 1.25% APY at $5,000 minimum deposit
  • 1.00% APY at no minimum deposit.

The 11-month No Penalty CD is unique in that while the 1.50% APY rate is locked in at deposit, you can still withdraw your principal and interest without penalty at any time (well, you do have to wait at least 6 days from the deposit date). In other words, your interest rate can never go down, but you can still jump ship if rates rise or if there is a better promo elsewhere.

1.50% APY for $25k+ is higher than any other liquid savings account rate, while there are a handful of banks that beat the 1.25% rate for $5k balances. However, the rates on savings accounts can change at any time. Here the the top banks right now:

  • DollarSavingsDirect at 1.30% APY
  • BankPurely at 1.30% APY

What’s notable about these banks is that they are both “clones” of existing banks (Emigrant Direct and iGoBanking, respectively) which have lower interest rates. So they have a history of enticing new customers with high rates, and then lowering the rates on existing customers while hoping that they are too lazy or forgetful to move away. If you move funds over, be vigilant and ready to move out.

1.50% APY is also right at the top for most 12-month CDs that do come with early withdrawal penalties, although some have lower minimum deposit requirements in the $5k range.

This can be a great companion acount with the Ally Bank Online Savings and Interest Checking accounts, which are my primary bank accounts. I’ll have to decide quickly how much to move over into this 11-month CD as the rate may not last.

Rates as of 6/20/17.

CIT Bank High Yield Savings Account Bonus: 1.15% APY + $125/$250/$425

cit_logoCIT Bank has a Spring Savings Account promotion that stacks a flat bonus of $125 to $425 on top of their current interest rate of 1.15% APY. Here are the bonus amounts based on the minimum average balance that you maintain over 3 full monthly cycles. The $125 bonus is the best “value” in terms of percent of balance. In my opinion, the $425 number only best at getting your attention.

cit425

Here are the terms highlights:

  • Account must be opened with Promotional Code BONUS17 by July 14, 2017.
  • Account must be funded within 30 days of account opening. Minimum deposit $100.
  • Funds used to qualify for bonus must be new funds, not already or recently on deposit with CIT Bank or One West.
  • Must maintain a minimum $15,000 average monthly balance for the first 3 full monthly statement cycles.
  • Any bonus for which the customer qualifies will be deposited to the account within 45 days of the end of the third full monthly statement cycle.

A full statement cycle is defined as beginning the first day of a month and ending the last day of that same month, e.g., 6/1/17 to 6/30/17. The average monthly balance for each full statement cycle is calculated as follows: at the end of each day, the Spring Savings Account balance is recorded. When the statement cycle ends, these end-of-day balances are added together and then divided by the number of days in the statement cycle to determine the average monthly balance.

Let’s run the numbers for $15,000. Let’s assume you open this account in June and fund with $15,000 right before June 30, 2017. That would mean you can maintain the minimum $15,000 average monthly balance for the first 3 full monthly statement cycles of July, August, and September 2017. The bonus would then be deposited within 45 days of 9/30/17, so let’s say 11/15/17.

As the account has no minimum balance requirement, technically you can take your money out at the end of September and as long as you keep it open you should get the $125 bonus. For the sake of simplicity, let’s just say you keep all your money in there for 4.5 months until you get the bonus on 11/15/17 and then take it all out at once.

So from 7/1 to 11/15, assume you’ve earned 1.15% APY (call it a 1.14% rate without the compounding) the entire time and then the $125 bonus on a $15,000 balance. That would leave an ending balance of $15,000 + $64 interest + $125 bonus = $15,189. That works out to $189 in interest and ~3.36% annualized return over 4.5 months.

If you wanted simplicity and kept your $15,000 in there for a full 12 months, you’d end up with $15,000 + $172.50 interest + $125 bonus = $15,297.50 That works out to $297.50 in interest and ~1.98% annualized return over 12 months. So you could look at like a 12-month CD paying nearly 2% APY if you had $15,000 to put aside.

Let say you put in $50,000. From 7/1 to 11/15, assume you’ve earned 1.15% APY the entire time and then the $125 bonus on a $50,000 balance. That would leave an ending balance of $50,000 + ~$213.75 interest + $125 bonus = $50,338.75. That works out to ~$338.75 in interest and ~1.81% annualized return over 4.5 months.

If kept your $50,000 in there for a full 12 months, you’d end up with $50,000 + $575 interest + $125 bonus = $50,700. That works out to $700 in interest and ~1.40% annualized return over 12 months. Not looking as good.

Let say you put in $100,000. From 7/1 to 11/15, assume you’ve earned 1.15% APY the entire time and then the $250 bonus on a $100,000 balance. That would leave an ending balance of $100,000 + ~$427.50 interest + $250 bonus = $100,677.50. That works out to ~$677.50 in interest and ~1.81% annualized return over 4.5 months.

If kept your $100,000 in there for a full 12 months, you’d end up with $15,000 + $1150 interest + $250 bonus = $101,400. That works out to $1,400 in interest and ~1.40% annualized return over 12 months.

Bottom line. I wouldn’t call this is a screaming deal but if you wanted to put aside around $15,000 to $30,000 for the next 3 to 12 months, this promo makes it one of the highest effective APYs for an FDIC-insured account out there. (I’d run specific numbers if significantly more than $15,000.) You wouldn’t be able to move your money for at least 3 months to get the bonus, though you would still earn the 1.15% APY if you did withdraw early. You’d have to decide for yourself if the effort is worthwhile. Reportedly, CIT Bank does not perform a “hard” credit check when opening a new account.