CD 4 in our emergency fund CD ladder – max rate at the local credit union

January 27th, 2009 · 1 Comment

We opened our fourth CD in our emergency fund CD ladder over the weekend.  As I commented on my own post about our third CD, we went with a local credit union rather than any of the online banks because the yield was so much higher.

image: http://www.sxc.hu/profile/cobrasoft

image: http://www.sxc.hu/profile/cobrasoft

As I’ve learned the hard way, about a week before the 25th (which is our target date for opening each CD) I did a survey of yields on 6-month CDs.   I was quite surprised to find that even the highest yields listed on bankrate.com page of 6-month CDs are lower than the 3.19% APY offered at our local credit union, ATFCU.  The highest on bankrate.com was 2.95% APY from some place called Ascencia, ING Direct was at 1.75% APY, and FNBO was at a 2.00% APY.  Yes, the credit union has a minimum of $1,000 but we’re well over that with our monthly emergency fund amount.  By the way, only ING Direct has no minimum that I know of.  HSBC has a token minimum of $10 so that’s pretty close to nothing I guess.

Anyway, so on Wednesday of last week I ended up quickly figuring out how to get the money quickly over to our credit union account, which unfortunately wasn’t linked electronically to any of our online banks (we only have a savings account at the credit union and most online banks only link to checking.)  I ended up transferring the money to Wachovia via ACH, then rushing to a Wachovia branch on Friday to withdraw it and bring it over to the credit union branch.  It turned out that our credit union had just, in the last week, rolled out the ability to create CD accounts online so the teller simply deposited the funds into our share savings.  I then went home and created our fourth CD in the ladder via the online process.  I was going to wait until Sunday the 25th for that, but then I realize our money was sitting in an account paying a piddly 0.19% rate, so I ended up creating the CD on the 24th.

I’m extremely pleased to be getting such a good yield on a 6-month CD given what is going on with rates plummeting all over the place.  This one even bumps up our average yield across all four CDs to 3.18% — a bit higher than the 2.40% APY that an ING Direct Orange Savings is currently yielding (which is where we were previously parking our emergency fund cash.)  The last two months worth of funds are currently in a savings account at FNBO Direct earning a 2.80% APY, a third of a percent less than the CDs.  Hopefully we can keep that record up and have a win by having used a CD ladder for our emergency fund.

Tags: Savings

1 response so far ↓

  1. 1 Jumbo CD Rates // 2009.02.11 at 10:10 pm

    Great idea on checking out your credit union. In a falling rate environment, credit unions will often have higher rates then banks because they tend to react more slowly to changing rate conditions. This also means when rates turn around, banks will often increase faster.

    Another interesting feature of many credit unions is they often pay dividends at the end of the year. This can significantly increase your total rate of return.

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