Using CDs for Short Term Savings
Have you ever considered a Certificate of Deposit (CD)? I’ve never used one myself. About the time I had significant short-term savings built up I found out about high-yield savings accounts. CDs and their restrictions seemed like a product of the past. Of course, you can achieve both flexibility and high-interest with a CD laddering strategy. But that takes a bit of discipline and patience to get that up and running. So, for the past few years it’s been high-yield online savings for me.
Online Savings
But let’s be honest, things have been pretty stale lately in the online savings world. It hasn’t been fun watching interest rates plummet to almost 1.00% at most banks. Everyone is searching for a better place to put their short term cash flow. Most recently, the rate drop at ING DIRECT has prompted me to consider another account. While I like ING for most of my savings goals, I can see myself moving the emergency fund from their to Ally.
Ally Bank’s No Penalty CD
I recently reviewed Ally Bank’s products. One of the CDs they offer is a “No Penalty” 9 month CD. I can’t stop wondering whether I should move our cash to one of these no penalty CDs for a while. The CD is FDIC insured, has no fees, and doesn’t have a minimum balance. The best part about the CD is that it combines a decent yield with the flexibility (to withdraw without penalty) that you get from online high-yield savings.
Have you moved to the No Penalty CD? If not, where are you getting your short term cash return from?
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First check to see if they do a HARD PULL on your credit report. I’ve heard that they do.
Thanks for the head’s up, Ron. I checked and according to jim from Bargaineering it’s a soft pull that they do for CDs. They do a hard for their OSA.
We actually have a bit too much in our savings now from the sale of our co-op and I’ve been considering the Ally no penalty CD. Certainly the rate is better than many online banks and with no penalty it doesn’t seem like there’s much reason not too open a CD with them (9-month that is).
How has your experience with Ally been? Have you open a CD with them?
I didn’t open the CD with them. I ended up just sticking it in a couple of ING CDs. But I did have a savings account about a month ago (they closed it because I never funded it). The service they provided was great, and the setup is easy. If I were you, I’d consider the Ally CD or look at a local credit union. Smarty Pig also still has a decent savings rate.