Are interest rates going up??

[RSKY]

Thoughts?

Cash in US dollars is a position.

A TIPS ETF has been able to keep up with the super mild inflation we've expereinced. This inflation-fighting investment is performing up to speed - MarketWatch

Why CDs? Why not a preferred equity

This is not my money. It is somebody else's and all they will agree to is CDs. If it were mine it would be in mutual funds.

RSKY

 

[fishheadbob]

Lessen your shopping by going to Bankrate Monitor to see what the offers are in your area. We use that to see what other financial institutions in the area have to offer. As always be sure to read the fine print before you sign as everybody's offers are rarely the same, what are withdrawal penalties, death policies, etc..
And yes, some banks will roll a renewing CD to the lowest rate on that day absent any instructions from the owner.

 

[RSKY]

Lessen your shopping by going to Bankrate Monitor to see what the offers are in your area. We use that to see what other financial institutions in the area have to offer. As always be sure to read the fine print before you sign as everybody's offers are rarely the same, what are withdrawal penalties, death policies, etc..
And yes, some banks will roll a renewing CD to the lowest rate on that day absent any instructions from the owner.

One of the problems I had was the CDs were loosing nearly $200 week between what they were drawing and could draw.

Also nothing on the net compared to dealing face to face. At one bank they had to go all the way to the President to raise their offer. At the next one the 24-year old girl beat that offer without blinking an eye. All I had to do was mention the amount. When I did she politely took the paper I was holding out of my hand, put it back in a pile, opened a drawer and took out another and gave it to me. She then beat the rate shown on that paper by a half a percent. She called me the next week and upped the offer another nine tenths of a percent. Her problem was that early withdrawal cost $35 and TWO YEARS INTEREST. So she lost.

I cashed in CDs at three banks today. Or at least I tried to. The first didn't charge anything that I could tell for withdrawing nearly 50k. Second bank wanted over 1k in fees and penalties for 65k. Third bank wanted less than $100 for withdrawing double the others combined.

Guess who we will never do business with again?

So the second bank's CDs will remain until they come up for renewal when they will be moved. As will the checking account that is there. As will anything else my 'client' has there. They were friendly enough but still..........

Anyway, the money has been withdrawn and redeposited at another bank. Part of the reason I went with that bank was their withdrawal policy and the fact they let me put names on the CDs in groups. Long story that I'm not going to attempt here.

The ordeal is (nearly) over.

Oh yeah, one other thing, my client has annuities at two of the banks. I can already see that it is going to be an ordeal to get them away from the companies holding them. Both companies have been contacted and all I am getting is a runaround. When I talk to them you would think that it is their money and I am trying to steal it. Paperwork after emailed paperwork just to find out what interest they are paying if any. Two of the financial people at banks said that they refused to sell them. Because they are such a bad deal for the purchaser. All shook their heads when I mentioned them and wished me luck finding out anything and getting the money back.

RSKY

 

[dfkrug]

I buy CDs, but also trade stocks and options.

Interest rates are rising, and have been for over a year. You can now get 2% on insured 12 mo. CDs. Since
rates are rising, I would not lock in rates for anything longer than one year. Even with my one-year-max
strategy, I bought some 12-mo CDs early last year at 1.3-1.5%. During last year, rates on money went up to
as high as 1.6% or so. Kind of an inversion there, which I want to minimize.

These rates are not at the corner bank. You have to go national (Synchrony, Ally, Marcus, etc.) or even
"brokered CDs", which buy and sell like bonds. My broker (TDAmeritrade) had one last month at 2.05%-12 mo, and it
was from Wells Fargo. I don't know any WF regular customers getting that rate.

 

[ultrarunner]

Schwab has Brokered CDs and my local Credit Union is offering 2% for 14 months.

I think I will be moving some of Mom's into the Credit Union... she is not interested in Stocks.

Credit Union has always treated us fair... it was something I got the entire family into about 10 years back...

The option is to do nothing at 1.25% and see if the rates go up...

 

[RSKY]

I buy CDs, but also trade stocks and options.

Interest rates are rising, and have been for over a year. You can now get 2% on insured 12 mo. CDs. Since
rates are rising, I would not lock in rates for anything longer than one year. Even with my one-year-max
strategy, I bought some 12-mo CDs early last year at 1.3-1.5%. During last year, rates on money went up to
as high as 1.6% or so. Kind of an inversion there, which I want to minimize.

These rates are not at the corner bank. You have to go national (Synchrony, Ally, Marcus, etc.) or even
"brokered CDs", which buy and sell like bonds. My broker (TDAmeritrade) had one last month at 2.05%-12 mo, and it
was from Wells Fargo. I don't know any WF regular customers getting that rate.

I am getting 2.4% for 55 months with two 'bump ups' during the life of the CD. I was offered 2.6% but the withdrawal penalties were huge on that one. It was strongly hinted that the rates were going up but of course they couldn't really know or say. As I have stated several times on this thread this is not my money but somebody else's. So I had to do as they wished and invest the money locally in CDs. If it were my money I would have done differently. The withdrawal penalties mean a lot to the owner because they are over ninety years old. And they want the money readily available in case it is needed for deteriorating health. Also in case of health problems I have instructions as to how to handle the money. To put it bluntly the owner is preparing for their death. They wanted things arranged in a certain way and I have done so. My original question about what everybody thought about the interest rates rising was to help me make a decision between the 2.4% with bump up later, or the 2.6%.

I also thought it would be a good topic for a discussion.

RSKY

 

[npalen]

It is a good topic for discussion and I've learned from it.

 

[RSKY]

One point I have failed to make in this discussion. Do NOT depend on the online information. Several people have mentioned different websites. These should only be used as a guide. If you are investing in CDs or anything else go to the banks and talk to the people there. I was told several times that each CD is individually negotiated. What you get depends on the amount you are investing. The bank I mentioned above that wanted such a high amount for early withdrawal also seems to be losing market share in our area and may be in trouble. Or so I was told at a couple other places. Another surprising fact is that when I mentioned the banks that I had been to the older financial people would loose their smile at the mention of one of their competitors, but not others. One young lady even told me I would get higher rates from a competitor if I took one of her ink pens and made sure they knew I had been talking to her. Said they hated her because she had hired three people away from them.

As I have said the entire ordeal has been very educational.

RSKY

 

[dfkrug]

My original question about what everybody thought about the interest rates rising was to
help me make a decision between the 2.4% with bump up later, or the 2.6%.

No one can perfectly predict the future, but the interest rate trend is certainly up right now. If you get locked in
for any significant period, over say 12-mo, then there is a risk of missing out on rates that may be as high as 3-4%
or more in a few years. If I or my client was 90yo, I would not be in any CDs over maybe 3mo, or no CDs at all.

Also, note that FDIC insurance is good to only $250K per person. So spreading money around to multiple institutions
has value. Not just to the 4 too-big-to-fail mega banks here in the US.

More on brokered CDs: these CDs have no cost to the buyer when sold as original issue, but they WILL incur commissions
if sold (or bought) on the secondary market. When interest rates rise, previously issued CDs are worth less when sold
before maturity. Just like bonds.

 

[RSKY]

No one can perfectly predict the future, but the interest rate trend is certainly up right now. If you get locked in
for any significant period, over say 12-mo, then there is a risk of missing out on rates that may be as high as 3-4%
or more in a few years. If I or my client was 90yo, I would not be in any CDs over maybe 3mo, or no CDs at all.

Also, note that FDIC insurance is good to only $250K per person. So spreading money around to multiple institutions
has value. Not just to the 4 too-big-to-fail mega banks here in the US.

More on brokered CDs: these CDs have no cost to the buyer when sold as original issue, but they WILL incur commissions
if sold (or bought) on the secondary market. When interest rates rise, previously issued CDs are worth less when sold
before maturity. Just like bonds.

Your points in order.

The CDs I purchased have two "bump ups" during their 55-month life. If rates go up a significant amount, say half a percent, I call the bank and give the financial officer the CD number and tell him I want the rate bumped. The CDs then are adjusted to the higher rate. That is the reason I chose the lower initial rate. I will have to depend on a spread sheet to decide when to give them a bump.

Also, the bank I purchased from has much better rules for withdrawing money from a CD. I could have got a 0.2% higher rate elsewhere but the withdrawal penalties were wicked. Two years interest on the entire CD and $35. For CDs over $200,000 that is a LOT even at 2.6%. The bank I chose only penalizes one year's interest FOR THE AMOUNT WITHDRAWN plus $25. So we could take out $10,000 and it would cost $265 instead of over $5000. THAT was the biggie. I ran into problems with this at the second bank when I went to cash in the old CDs. They wanted over $1000 to cash in around $65,000.

This also allowed me to get larger CDs and not have to purchase a bunch of smaller equal ones to avoid penalties in case they are needed for health reasons.

If there are two names on CDs they are EACH insured for $250,000. Or that was what I was told at the banks and what I read online. Each of the three CDs purchased had at least four names on the title, the original and the PODs.

In my limited experience brokered CDs have not worked out well for anybody in my family. Another long story. Anyway, due to the owner's instructions they were not something I looked at.

I have done the best for my client or clients. I have studied on this problem for a month and talked to financial officers at nine different banks (I think that is correct). And I have talked to financial people at different branches of the same bank. THAT was interesting.

Tomorrow I have to start helping another 'client'. Also over ninety years old. And I have to start digging into the annuity problem for the first client. That may be a major problem. One lady whom I talked to has worked in banks for 44-years said there was no way in he11 she would sell anybody one and would not let any of her family buy one. I have got to remember not to loose my temper.

RSKY