a bank may be able to offer you interest or benefits on other accounts
if you maintain a minimum balance in another account.

by keeping $6000 in CDs, does this get you any gains on your checking
account? savings account?

maybe monthly fees are waved, you get as higher interest rate on
savings or checking account, maybe checks clear faster.

benefits may not be as tangible as money in the bank

Elle wrote:
- quote -

Actually, Emigrant has guaranteed that the 4% will not go down at least
until Dec 31. (It can increase though.)

"Bucky" <uw_badgers[at]email.com> wrote
- quote -

Capital One gives better customer services, say.

Don't get me wrong. I agree that one should certainly consider
emigrantdirect for certain needs.

- quote -

IMO this is one of the most popular and highly misleading assertions about
ladder construction: An investor reasons that, in a few months, interest
rates will be even higher, so why bother buying a CD that has a longer
maturity, but at a higher interest rate?

The reason of course is to start earning that higher interest rate now, so
one does not lose a few months of the differential in interest between, say,
a money market account and the CDs rate. Now it might turn out that the wait
would be worth it, by the numbers. But it might also turn out not to be.

I don't dispute the competitiveness of a 4% interest rate. I do dispute that
it's certainly not going to go down. It's a fact that EmigrantDirect
reserves the right to lower this interest rate at any time.

"Bucky" <uw_badgers[at]email.com> wrote
- quote -


Brokered CDs most certainly do build in information just like bonds. Their
prices change just like bond prices change.

There is another reason, to keep the money set aside from the temptation to
use it for something other than a real emergency.

"Andy" <ineverevercheckthismailbox[at]yahoo.com> wrote in message
news:1127337846.993443.159570[at]g49g2000cwa.googlegroups.com...
- quote -

herlihyboy wrote:
- quote -

Typically, these internet high yield savings account rates change about
the same frequency as the fed changes their rates. So these past couple
of years, about 4 times a year.

- quote -

If you already bought a CD, obviously the rate is fixed for the
duration. But if you're asking about CD rates (assuming you haven't
bought it yet), my observation is that they also change in conjuction
with savings rates, which move with federal reserve changes. Unlike
bonds and stocks, CD rates do not "build in" anticipated rate changes.
So if you're anticipating a fed fund increase, then wait for the CD
rates to go up.

Elle wrote:
- quote -

I disagree with that philosophy. There are plenty of inferior products
on the market that there's no point in buying. Capital One's high yield
savings is at 3.45%. All the rules are pretty much the same as
Emigrant's. What would be the point of opening a savings acct with
Capital One over Emigrant? Yet it's still on the market. Or compare
Emigrant savings to a money market fund like Vanguard. Both rates are
not fixed, and Emigrant's has been consistently 0.5% higher. There's
not much of a point to having a money market fund, but it's still on
the market.

- quote -

In the old days before these high yield savings accounts, CDs provided
a significant yield increase over regular savings accounts. So it was
worth locking up money for a higher yield. Now there's almost no
difference in yield, so the only difference is that you're locking in
the rates. In a rising interest rate environment, you don't want to
lock in your rates. Now if we were in a falling rate environment, then
maybe a slight edge for CDs, but not as much as it used to be.

Bucky wrote:
- quote -

I saw that also today on bankrate.com. However, how stable [best guess
is fine, here] is the yield in the savings account versus the yield on
a 6-month CD? Would the yield on the MM acct be more likely to head
south sooner than the yield on the CD?

"Bucky" <uw_badgers[at]email.com> wrote
- quote -

If there were no point, then they wouldn't still be on the market.

Pros of CDs:
The rate can't change the next day but is locked in for a known term.

Cons of CDs:
Money is locked up for a fixed amount of time.

Etc.

Andy wrote:
- quote -

I was just going to say the same thing. There's a recent phenomenon
with these internet high yield savings accounts that have interest
rates equivalent to 6-mo CDs. They're popping up all over the place.
Combined with rising interest rates, there's no point to doing CD
laddering.

herlihyboy wrote:
- quote -

Now that Emigrant Direct is paying 4% APY on savings accounts there
really isn't much point using a CD ladder for emergency savings. Just
park your emergency fund at Emigrant Direct and collect the same
interest rate you would have on a 6 month CD.

Andy

Tad Borek <borekfm[at]pacbell.net> writes:

- quote -

Apropos of that, I note that Fidelity (and I bet other brokers) now
allows customers to buy Treasuries at auction commission-free. And
of course there's always what-used-to-be-Treasury Direct.

--
Rich Carreiro rlcarr[at]animato.arlington.ma.us

herlihyboy wrote:
- quote -


Ryan,
Early-redemption costs on CDs can be really low, it depends on the bank,
so that may not be much of a problem. And anyway the basic idea is to
eke out some additional interest (over what you would earn in money
market) by using CDs, and taking on the chance that you might face that
early redemption someday. If it happens once every 3 years you'll
probably still come out ahead, because of the additional interest earned
over the period.

This could change, BTW - to the point where CDs might not look so hot -
it's good to constantly keep an eye on the current rates for CDs, money
market funds, savings accounts, and maybe Treasury Bills, which are very
easy to buy and sell at low cost through a brokerage account.
Bankrate.com is a good place to watch this stuff.

-Tad

In article <1127306786.211427.263970[at]g44g2000cwa.googlegroups.com> ,
"herlihyboy" <ryan.parmenter[at]gmail.com> wrote:

- quote -

I suggest having a credit card or home equity line of credit
to handle these unexpected large bills. Then use the CD ladder
to pay off the bills as they come due. You don't want too
much money sitting in an emergency fund since it isn't working
very hard. It is better to invest that, then have some fall
back like a H/E line of credit. Just make sure you only use
that for real emergencies, and don't use credit for everyday
type of purchases.

-john-

--
================================================== ====================
John A. Weeks III 952-432-2708 john[at]johnweeks.com
Newave Communications http://www.johnweeks.com
================================================== ====================

I basically understand the concept of how a CD ladder works. In
another post, someone suggested using a CD ladder for one's 3 - 6 month
emergency fund. Each CD would be one month's worth of expenses. My
questions is, if this plan is followed, what happens if an emergency
occurs that costs more than a single CD [furnace goes out]? Would I
have to cash out CDs that aren't matured? Would there be penalties
associated with this?

Am I better off putting the full amount in a money market fund [ING,
Emigrant, etc.]?

Thanks,

Ryan