1. CD Yield that Far Exceeds the Competition

While there is going to be some variation in the yields offered by different institutions, it is important to make sure that the difference is reasonable. A CD rate that is much higher than the competition might be something else entirely. It may be a marketing ploy to get you to come in so you can be pressured into something else, or it might be a CD with strings attached, such as the great rate only applies to $1,000, and the rest of the money in the CD earns a much lower rate. If a financial institution is offering a CD that yields more than double its competitors for similar products, that could be a red flag.

2. Call vs. Maturity

Make sure you know whether or not there is a call period involved. Realize that the call date will be different from the maturity date, and that confusing the two might be costly. Determine what the call period is; you might get a good rate now, but the bank might be able to call the CD, forcing you to renew at a lower rate, later on. Be clear on when the call period is, and what the maturity is.

3. Be Wary of Brokered CDs

Brokered CDs can be a way to find a better yield, since the broker may have access to different rates. However, it is important to find out who the issuer is. If the issuer is not FDIC insured, you run the risk of losing your money if the financial institution fails. Don’t just jump at what your broker offers you; find out about the risks, and learn who the issuer is so that you can make sure your money is properly protected.

4. How Will You be Paid?

Learn how you will be paid. Will your interest be paid to you, or will it be added to the CD during the term? How often will your interest be paid? Many financial institutions pay annually or semi-annually. You should also find out whether the bank will deposit the money into your account, or whether it will send you a check. Be clear about how you can expect to be paid, and when you will be paid.

5. There are Penalties for Early Withdrawal

Realize, too, that you will pay penalties if you withdraw your money early from your CD. If you take your money out before the maturity date, you may not receive all of it back. Find out what the penalty is for early withdrawal, and make sure that you can afford to lock away your money for the length of the CD term. If you think you will need access to the money before the CD matures, look for another cash product.

Post from: Highest CD Rates Info

5 Things to Know Before Opening a CD

Low Rates are Likely to Persist in CDs

It is probably going to be a while before yields on CDs rise. Indeed, Ben Bernanke, chairman of the Fed, says that it might be 2013 before we see any significant boost to rates. If inflation takes of, like some think it will, you could find yourself losing in real terms, since cash loses value due to inflation.

With economic stimulus the main focus of many policy leaders, it is likely that we will be seeing some wealth eroding inflation before we see higher rates. That is something to keep in mind as you put together your financial plan.

Looking for Other Additions to Your Portfolio

Sure, you should look for the highest CD rates and do your best to use them for safety. However, it is important to realize that your investment portfolio needs something else. There are higher yielding assets that can be used to help grow your portfolio — and ensure that your returns beat inflation. But you need to plan it out.

Even for those who are somewhat risk averse, there are stock investment options that can help reduce exposure to loss. Index funds are popular, and dividend paying stocks are becoming more popular. While there is always the risk of loss, many people find that indexes rise over time, and an index fund can provide diversity and reasonable returns, without the risks that come with stock picking. Even stock picking’s risks can be limited with the help of dividend stocks. These stocks are often solid, and fundamentally sound, especially if you choose those with yields beween 2.5% and 5%. You could still lose, of course, but the chances are smaller when you are careful.

With careful research, and calculated risk, it is possible to make informed investment decisions, and expand your portfolio to include those investments that will help you grow your wealth a little faster. You do want to keep your CDs; they provide safety and stability. However, especially if you are younger and trying to build wealth rather than preserve wealth, CDs aren’t going to cut it alone. You will need the aid of higher yielding investments and assets.

Take a look around at your options. Consider how you might give your portfolio a boost. Consider tax advantaged retirement accounts, and think about how you can get involved with higher yield investments — while limiting some of your exposure to risk. There are ways to do this, and if you can come up with a good plan, your investment portfolio will thank you.

Post from: Highest CD Rates Info

Your Portfolio Should Be About More than CDs

Saving Up for CDs

You are likely to need to start by saving money. Decide how much you will need to reach your goals. If you want to create a reasonable stream of income, you will probably need to consider jumbo CDs, since your interest income will be higher, with more capital and a higher rate. Even if you plan to start a CD ladder with smaller amounts of money saved up, it helps to have a plan.

The first thing you need to do is look for money leaks in your budget. If money is leaking from your budget, you need to do is plug those leaks. Look for waste. Some of the biggest money leaks include:

• Subscriptions you don’t use
• Eating out instead of preparing your own meals
• Not using energy and water efficiently

You can probably look through your own spending habits and find other money leaks that can be plugged. Check your budget, and then look for ways to avoid spending on unnecessary items. You will have a little bit more money to save up for bigger CD investments down the road.

You can also earn more money to save up for your CD investment. Look for ways to increase your income. In a lot of ways, this can be more effective than relying on spending cuts. There are only so many cuts you can make to your budget; there is no limit to how much income you can earn. Look for ways to earn more money, from starting a side hustle, to developing a freelance or consulting career, to creating passive income streams.

Start Small

If you don’t have the capital you need quite yet, you can start small. The important thing is to just get started, and to do build up your savings as you can. Many people start with a CD ladder, building up the funds as they get them, saving up until there is enough money to eventually cash everything in for a jumbo CD. This approach would require some adjustment in the way the CD ladder works, changing the approach to one in which you would try to have all of the CDs mature at around the same time so that you could put the money into a jumbo CD down the road.

How you decide to proceed depends on what would work best for you, and how you are most likely to reach your goals.

Post from: Highest CD Rates Info

Saving Money for CD Products

Including CDs in Your Income Portfolio

One of the first things you need to look for as you determine to include CDs in your income portfolio is how often the interest is paid to you. In some cases, the interest isn’t paid to you until the CD matures. In other cases, though, the bank or credit union makes regular interest payments monthly, quarterly or semi-annually. If you are planning to use a CD in an income portfolio, you will need to make sure that you are being paid regularly throughout the maturity term of the CD. The point is to add to your revenue stream, so you want regular payments. (Remember that you will have to pay income tax on your CD interest earnings.) Make sure that you include a mix of other investments in your income portfolio. CDs can be great to add another measure of safety and security, and a level of capital preservation, but they aren’t going to provide a very high yield.

Using Jumbo CDs in Your Income Portfolio

Many people are reluctant to use CDs in income portfolios because of the low yields. Right now, especially, cash products have rather low interest yields and that means that the income you receive from CDs is likely to be negligible, unless you have a large number of CDs, or you have high denominations of CDs.

One of the ways that some people maximize the use of CDs in an income portfolio is to turn to jumbo CDs. Jumbo CDs are those that have denominations of more than $100,000. These larger CDs can provide you with a better way of earning income, since you have a larger principal to work with. If you have a $100,000 principal, and you are willing to put it way for 10 years in a jumbo CD, you can earn a 3.15% yield in some cases. That amounts to $3,150 per year. If you are paid interest quarterly, that’s $787.50 each interest payment. Not too shabby when combined with other investments you might have in your income portfolio.

Bottom Line

Of course, in order for it to work, you need to have a substantial amount of principal, or you need to build up your CD ladder to a point that you have saved a large principal over time. Adding to your income portfolio over time is usually a work of seven to 10 years, since few people start out with the principal to make it practical — no matter the investments included.

Post from: Highest CD Rates Info

Using CDs in an Income Portfolio

But what happens if inflation arrives in full force, while you are still locked into today’s low interest yields?

Could Inflation Be Right Around the Corner?

One of the biggest concerns right now is coming inflation. Some even think that we will likely see hyper inflation soon. This is because the economy is not recovering fast enough for some people. Indeed, there is some speculation that the Federal Reserve will announce more stimulus measures after the next meeting of the Federal Open Market Committee. In Jackson Hole this past weekend, Ben Bernanke hinted that he was ready to add more stimulus to the markets.

This means more money in the economy — and the chance that inflation will kick in. Indeed, some think that all the stimulus that has been pumped into the economy since the 2008 financial meltdown will come back to haunt us in the form of inflation. Or, perhaps, in the form of stagflation. Inflation comes with economic growth. However, if the economic growth doesn’t accompany the rise in consumer prices, we’ll see stagflation. And in a period of stagflation, your CD holdings become especially difficult to see real returns on.

Getting Ready for High Inflation

It always helps to be prepared for periods of high inflation. And some analysts think such a period is coming. After all, there is a great deal of debt in the economy right now, and some of the people in charge think that creating more money to “spend our way out” is the answer. As a result, some economists think that high inflation is on the way. You need to be prepared.

Now is a good time to pay down your debt, and build up an emergency fund. You might also want to look around for alternatives that protect against inflation. TIPs can help protect your wealth from inflation — at least a little bit. Many others are getting into the idea of precious metals. Gold might be a little too rich for you right now, but some think that silver might be a good alternative, and it’s much more affordable than gold. You can also consider which stocks might grow. During periods of stimulus, the stock market tends to do reasonably well.

However, you have to be careful. Many of the investments used to beat inflation are somewhat risky themselves. While you could find yourself making a tidy profit, there is also the chance that you could lose your principal on a risky investment. Make sure to weigh the pros and cons, and make a decision based on what is best for your situation.

Post from: Highest CD Rates Info

Are CDs Enough to Beat High Inflation?

Maturity Date

The maturity date of a CD is the date at which you can access your money penalty-free. You receive a regular rate of interest during the term of the CD, up until it matures. At the maturity date, you can either withdraw your money, or roll the CD over into a new CD. Some CDs hold on to your accrued interest until the maturity date, while others provide you with a regular payout of interest earnings. In any case, most CDs will charge you a penalty if you withdraw money from the account before the maturity date. For the most part, the longer you are willing to wait for your money, the higher the interest yield will be. However, your money will be essentially locked up.

Call Period

If one of the features of your CD is a call period, understand that this is different from a maturity date. The call period is the time that the bank has to “call” your CD. When a financial institution calls your CD, it is terminating it. There is no penalty for the financial institution, but you will have to figure out what to do next. You will receive all the principal and interest you are owed, but you will have to shop around for a new CD. Some CDs are termed “one-year non-callable.” This means that the financial institution can’t call your CD until a year has passed.

You should understand, though, that a call period is not the same as your maturity date; while the bank or credit union can terminate the CD, you can’t without paying a penalty. The call period has nothing to do with the maturity date. They are two separate things. You need to understand this so that you don’t try to withdraw money, mistaking the point at which a bank can call the CD with your maturity date.

Bottom Line

Some CDs have call features so that the bank can lure in depositors with their high yields. However, the bank can decide to call your CD after a set period of time. This usually happens if interest rates drop. When interest rates head lower, a financial institution might decide to exercise the call feature so that it doesn’t have to pay you the same high yield. Of course, you can’t do the same, terminating the CD at will if interest yields rise. A call feature is designed ultimately to help the financial institution. However, if you are interested in getting a more competitive rate, and don’t mind the risk that the financial institution will call the CD, it might not be a bad option.

Post from: Highest CD Rates Info

CD Basics: Call Period vs. Maturity Date

During times like these, the gut reaction is to find safety in something. For years, cash bonds have been considered “safe” in times of economic upheaval. But is that still the case? Even if the debt ceiling is raised (politicians claim a deal has been reached, although it needs to be voted on), there is still the possibility that the U.S. credit rating will be downgraded. There is just a great deal of debt — and not enough tax revenue to cover the shortfall, no matter how big the spending cuts are. In such a financial environment, it is hard to get excited about Treasury bonds (what happens if the U.S. defaults next time?), and especially hard to get excited about cash.

What’s Next for the U.S. Dollar?

With a possible debt downgrade in the works, and with spending cuts as a result of the debt ceiling agreement likely to drag on an already-faltering economy, cash might not be the best choice. Will the U.S. dollar crash with all this difficulty? Will inflation make cash products like CDs inadequate? There are questions that need answering, and as we approach an election year, no one wants to make hard choices.

So, what can you do? Really, getting back to the basics is probably your best defense against the debtpocalypse, should it arrive. Pay down your debt as quickly as possible, live within your means, and build your emergency fund. Having some food storage, and making sure that you are adequately prepared for an emergency with what you need in your home.

While the U.S. financial system probably won’t crash, and while we’ll probably get through this current crisis, it’s time to figure out what your next move will be. You need to figure out whether you trust the U.S. dollar, and whether you still trust U.S. Treasuries. While having these investments probably won’t ruin you, it isn’t a bad time to consider you asset allocation. Are you sufficiently diversified in your investments, including some investments that might benefit from a tanking dollar, or foreign investments that seem solid. Consider your options, and prepare for some of the problems that might come. Even if the debt ceiling is raised for now, another battle could very likely ensue in a few months when the new debt ceiling is reached.

With markets in turmoil, the economic recovery in doubt, and with the future uncertain, it’s time to plan, consider your sources of income, and be prepared for what may come. A financial meltdown might be just around the corner. Even if it’s not, though, it never hurts to shore up your finances; that way you’ll always be prepared for what’s coming.

Post from: Highest CD Rates Info

Will Cash Really Help You During the Debtpocalypse?

As you try to decide what might be the best option for you, it’s important to take the following items into account:

• Do you have a basic emergency fund? Many financial gurus suggest that you have $1,000 in an emergency fund before you start paying down your debt. If you don’t quite have a basic emergency fund, build that up, and then tackle your debt.
• Do you have reason to believe your job is in danger? There are usually signs associated with upcoming lay offs. Sometimes the company will even announce them. Weigh your concern about losing your job, and determine how realistic that concern is. If you are unlikely to lose your job in the next few months, do all you can to pay down your debt. If layoffs have been announced, or if you feel your job is in danger, you might want to do all you can to build your emergency fund, paying only the minimum on your debts.
• What kind of return will you get? One of the problems with putting money into CDs is that the return is quite low. Indeed, any return you get from a CD is likely to be much lower than the interest you are paying on your debt. You might be better off paying down your high interest debt before it further erodes your wealth.

Post from: Highest CD Rates Info

Should You Invest in CDs, or Pay off Debt?

Benjamin Franklin: Founder of Pithy Money Sayings

Benjamin Franklin had a wealth of advice to offer on several subjects. Money was just one of them, including the famous, “A penny saved is a penny earned.” Ben Franklin actually wrote an entire book on money called Way to Wealth. Here are some of the gems from that publication:

• Diligence is the mother of good luck.
• Beware of little expenses; a small leak will sink a great ship.
• He that goes a borrowing goes a sorrowing.
• When you have bought one fine thing you must buy ten more, that your appearance maybe all of a piece.
• When you run in debt; you give another power over your liberty.
• Get what you can, and what you get hold.
• Want of care does more damage than want of knowledge.
• Be ashamed to catch yourself idle.
• Early to bed, and early to rise, makes a man health, wealthy, and wise.
• Drive thy business, let not that drive thee

Ben Franklin also offered a great observation on compound interest in his Advice to a Young Tradesman, Written by an Old One: “Remember that Money is of a prolific generating Nature. Money can beget Money and its Offspring can beget more, and so on.”

More Money Wisdom from Other Founders

While Ben Franklin is definitely one of our most well-known Founders and free with the advice, others have provided us with words of money wisdom:

• “Learning is not attained by chance, it must be sought for with ardor and attended with diligence.” — Abigail Adams.
• “I know nothing more important to inculcate into the minds of young people than the wisdom, the honor, and the blessed comfort of living within their income.” “I believe that banking institutions are more dangerous to our liberties than standing armies. Already they have raised up a
  money aristocracy that has set the government at defiance.”– Thomas Jefferson
• “All the perplexities, confusion and distress in America arise not from the defects of the Constitution, not from want of honor or virtue, so much as from downright ignorance of the nature of coin, credit and circulation.” — John Adams
• “Few men have virtue to withstand the highest bidder.” — George Washington
• “We are not weak if we make a proper use of those means which the God of Nature has placed in our power.” — Patrick Henry

Finally, I’d like to close with a quote from someone who wasn’t a founder, but still had interesting insights into human nature and money:

• “It is an unfortunate human failing that a full pocketbook often groans more loudly than an empty stomach.” — Franklin D. Roosevelt

Post from: Highest CD Rates Info

Happy Independence Day: Money Wisdom from the Founders

Advantages of CDs

There are some advantages to using CDs in a number of scenarios. Many people like to use them for capital preservation purposes, as well as for emergency funds. Some even include CDs in an income portfolio to help them with passive income. Here are some of the reasons that CDs can be a wise choice when it comes to parking your cash:

• CDs are safe: If you get your CDs through FDIC insured financial institutions, your money is safe. You do have to realize that there is a $250,000 limit on accounts at one bank (CDARS can be an option). With CDs, your money is safe if the bank fails.
• Higher yield on cash: Cash is notoriously low when it comes to returns. However, with CDs you can usually get a better yield on your cash. With the promise that you will keep your money in the CD for a set period of time, you are offered a higher yield.
• Set interest yield: Once you lock in, your interest yield is set for the term of the CD. So, if rates drop, you are protected.

For those who don’t mind having their money locked up for a set period of time, CDs can be helpful.

Disadvantages of CDs

Of course, there is a con for every pro. This means that you will need to be prepared to offset some of the disadvantages of CDs.

• Low interest yield: While some CD products can offer a yield that is high when you comparing to other cash products, the truth is that the yield is still low. You will not be able to build a solid retirement portfolio if CDs are your main strategy.
• Penalties for early withdrawal: You have to realize that you are giving up a certain amount of liquidity when you put your money in CDs. If you withdraw your money early, you will have to pay an often hefty penalty. This can be disappointing, and erode the value of your investment.
• Gains taxed as regular income: When you invest your money, your gains are taxed at special rates that might be lower than your current marginal rate. Income from interest earned on CDs, though, is taxed at your regular rate. And, even if you don’t receive a check for the interest earned in one year, you may still have to pay taxes on it.

As you can see, it is important to weigh the advantages and disadvantages. You can benefit from including CDs in your plans so that you have a measure of safety and stability, but you need to make sure you aren’t too reliant on them to build wealth.

Post from: Highest CD Rates Info

CDs: Pros and Cons