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I am wondering if I can use an on-line checking account with good interest such as one recently mentioned on this board as a place to park my money, instead of a CD. 3% is a pretty good deal. If there are no monthly fees, doesn't it make more sense vs. tying my money up in a CD? What is the catch?
thanks in advance
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3% is a pretty good deal. If there are no monthly fees, doesn't it make more sense vs. tying my money up in a CD? What is the catch?

The checking rate is variable. The CD rate is fixed.

To illustrate, in the past month or so, the American Express high-yield savings rate and the Bank of Internet's Boomer and Senior checking rates dropped about 0.5%. They can go up or down.

Also, some people here have access to CD rates from credit unions that currently can beat the high-yield checking and savings rates and the highest CD rates listed at bankrate.com.
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I am wondering if I can use an on-line checking account with good interest such as one recently mentioned on this board as a place to park my money, instead of a CD. 3% is a pretty good deal. If there are no monthly fees, doesn't it make more sense vs. tying my money up in a CD? What is the catch?
thanks in advance.


Marlaf:

It depends if you think you will need to money anytime soon. The short term CD rates are less then some MM accounts. So if you think you will need the money in a year or so, I don't think it pays to tie it up in a CD that is earning less then a MM account. I use ING which is paying 2.75% now (was 3% a month ago). I couldn't justify parking it in a 1 year CD earning less than that.

However, if you don't need to money for 5 years or more, you could do a 5 year CD ladder. You could set up a 5 yr ladder which would allow 1/5th of your cash to be available every year. This would also give you the benefit of have the 5 year rate, while allowing you to take advantage of rising rates every year (assuming they are going up).


Splotto
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