Monday, January 7, 2008

Where to find good CD rates.

With numerous interest rate cuts by the fed in the last couple of months, its hard to find good returns on CDs (Certificate Of Deposits) offered by Banks. Finding 6% APY returns on CDs was easy until recently; but not anymore. These days its hard to find any CDs that offers anything close to 5% APY.

While CD rates offered by banks may be disappointing, the next best option would be to go with CD's offered by local Credit Unions. Credit Unions, often, offer much higher interest rates than Banks. While your money in most FDIC insured banks is safe upto $100,000 per individual, the money at Credit Union is also safe as long as the Credit Union is insured by NCUA. This is a US Government Agency which, just like FDIC, insures deposits upto $100,000 per individual. So as long as your Bank or Credit Union is insured by FDIC or NCUA your deposits are well protected.

Fortunately for us, in the bay area, we have tons of Credit Unions around here which are NCUA insured. Most recently Patelco moved from being privately insured over to NCUA. Patelco is historically known to offer very high interest rates. So watch out Patelco, if you are in the market for CDs. Their 5.45%, 9 month CD just closed last Saturday. I am glad that I made it to Patelco, just a couple of hours before the offer closed on Saturday. Also keep a watch on offers by San Mateo CU and Tech CU.

One other advantage of going with CUs is that they don't compel you to open or maintain a Checking or Savings a/c with them. Even if they do, they generally have a very low minimum balance requirement from 1$ to 50$. In some cases they would fund those accounts with their money.

One might ask, will it not hurt my credit score if I open CD accounts with many Credit Unions? Well, it seems for CDs, most CUs only do a soft enquiry against your credit history. This is done using, what is called, Chex System. So the enquiry never appears or impacts your credit report or score. (For that matter, some smaller Banks too have now stopped performing hard enquiries for new CD accounts).

ING Direct which was once well known for its high CD rates has sharply cut down its CD rates. Same is the case with CitiBank. World Savings bank, which was one other front runner in CD rates, has been bought by Wachovia and as expected those CD rates are now .... history. Countrywide and Indymac Bank still seem to offer CDs with 5+% APY. You probably know why. Certain brokerage houses like ETrade and Ameritrade also are known for decent CD rates. However beware that some brokered CDs may not be fully insured. Read any fine prints and enquire before you go for a brokered CD. Well, that's about CDs. Will be back with more financial write-ups soon.


Anonymous said...

I never knew deposits with credit unions were insured like in banks. Very informative write-up...keep writing!

rock said...

what do you think about Patelco? insured by NCUA -- How good is that--

Anonymous said...

NCUA is similar to what FDIC is to Banks. So if a CU is insured by NCUA you need not worry as long as ur deposits are below 100k.