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With interests rates probably going up soon, doesn't that usually mean certificate of deposit interest going up? I have a good amount of cash I need to stash some where I won't gamble it away on index funds and have just been too lazy to open a cd, especially with rates as low as they are. This might be an incentive.
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With interests rates probably going up soon, doesn't that usually mean certificate of deposit interest going up?

Yes. Be sure to ladder those CDs in order to take advantage as the rates rise over time.

2old
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With interests rates probably going up soon, doesn't that usually mean certificate of deposit interest going up?

Yes, but the interest on a CD is usually fixed until the CD matures. So if you get a 5-year CD at 4.40%APY (today's 5-year CD rate at Ing Direct), you are locked into that 4.40%APY for the next five years and any rate increases that occur after today wil do that money absolutely no good! That is why the other poster suggested a CD ladder: get the benefit of the longer term with part of your money, but also keep part of your money in shorter term CDs so, if rates rise next year, part of your money can then be invested in a longer term CD at the then higher rates. See http://www.bankrate.com/brm/news/sav/20010521b.asp

Some banks and credit unions also offer "bump up CDs" where the rate will increase on some schedule. If you look into those, be sure to read the terms very carefully.

Keep in mind that CDs tend to make one's money "illiquid" until the CDs mature. Yes, in many cases you can cash out the CDs early, but there will usually be "substantial penalty for early withdrawal" that may end up undoing the higher interest one would have earned compared to, say, a money market account that is designed to have more liquidity and, incidently, increased yields would apply to the balances at the time of increase.
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I have a good amount of cash I need to stash some where I won't gamble it away on index funds and have just been too lazy to open a cd, especially with rates as low as they are.

Just one more suggestion and something I've been using during these times of low CD interest rates:

Take a look at Series EE and Series I savings bonds.

Present rates for EE bonds are 2.84%. You can cash them in after one year. Find any one year CDs paying that much? This rate will change in November and if rates are going up, so will it.

Series I bonds vary every 6 months with inflation and are presently paying 3.39%. With these, however, there's a 3 month interest penalty if you cash them in sooner than 5 years. Even so, that amounts to about 2.5% for the year. And if inflation continues, the rate will be a bit higher in 6 months.

Just my 2¢.

Andy
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That is why the other poster suggested a CD ladder: get the benefit of the longer term with part of your money, but also keep part of your money in shorter term CDs so, if rates rise next year, part of your money can then be invested in a longer term CD at the then higher rates.
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Keep in mind that CDs tend to make one's money "illiquid" until the CDs mature.


I thought a main reason for laddering was to make your money more liquid. Every year a CD matures, so you can have access to the money if needed, or put it back into a CD knowing another one will mature in another year.

Also, in rising rate environment, this makes sense to decrease your exposure to short term rates, but in a declinig rate environment, it can lower your interest rate over the long haul.

Dozer
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Present rates for EE bonds are 2.84%. You can cash them in after one year. Find any one year CDs paying that much? This rate will change in November and if rates are going up, so will it.

Series I bonds vary every 6 months with inflation and are presently paying 3.39%. With these, however, there's a 3 month interest penalty if you cash them in sooner than 5 years



The same 3-month penalty applies to EE bonds...

ACME
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I want to second the recommendation of savings bonds in a rising interest rate environment.

It is common for corporate and municipal bonds to issue bonds that are callable. In a falling-rate environment, the issuer will call the old bond and issue new bonds at a lower rate.

Savings bonds are, as far as I know, the only bonds that are "callable" by the buyer. If interest rates go up, you can "refinance" at a higher rate. There would be a one-time penalty (0.7%), but this would be a small sacrifice to lock in a rate 1 or 2% higher for the next 5-30 years.
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Just one more thing about savings bonds. From the web site

http://www.publicdebt.treas.gov/mar/marsbombuy.htm#purchaseoptions

3.3. Purchase limits

You may buy up to $30,000 of paper I Bonds in your own name each calendar year.

You may buy up to $30,000 ($60,000 face value) of paper Series EE Savings Bonds in your own name each calendar year.

There is no purchase limit for Series HH Savings Bonds.

Purchases of one series do not count against your limit for the other series. Savings bonds you buy as gifts or prizes for someone else do not count against your annual purchase limits.


This original post mentioned a "good amount of cash". This might be a limitation.

Andy
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