Best short-term CD?
September 6, 2017 4:56 AM   Subscribe

I just sold my condo, yay! There will be a three-to-six month gap between this sale and buying a new house, and I want to stick the down payment somewhere it will make more money than my piddling savings account. What's the best way to shop for a three-month CD?

I've looked at Bankrate and there are lots of small, regional banks that offer 1% or so, but I have no idea how to compare them or whether they're reliable/easy to work with. Is there a site that does good user comparisons? Do any of y'all have particular favorites or success stories? (Is there a better short-term investment vehicle I'm not thinking of?) We're talking a sum in the moderate five figures, nothing too fancy.
posted by anonymous to Work & Money (10 answers total) 5 users marked this as a favorite
Fatwallet forums are good for this sort of thing. But, I'm not sure a CD is the best way for you to go. If you may need the money in three months (as suggested in the question) then I would think you would want to keep the money in a more liquid form, like in a savings account or money market. I'm not an expert in CDs, but I think they usually have some kind of "early withdrawal" penalty if you don't leave the money in the CD for the full term.

I would check the basic money market yield at reputable banks/institutions and see if it's close to a short-term CD. There is a FW thread about money markets and similar accounts here, but, personally, I would go with a big national institution like Vanguard for peace of mind rather than trying to get a slightly higher rate.
posted by Mid at 5:19 AM on September 6, 2017 [1 favorite]

The spread between a high yield savings account (around 1% today) and the best 1 year cd is about .3%. So if you even had a year in it, 100k in a cd nets you $300 extra bucks, (or after taxes, $200ish depending on your tax bracket).

a 3 month cd would actually probably be smaller rate than a savings account.

Fat wallet is a good choice. I'm using Goldman Sachs Savings bank (formerly GE capital) and they have kinda crappy web interface but fine service. I get 1.05% now.
posted by sandmanwv at 5:52 AM on September 6, 2017

Ally has a no penalty CD at 1.5%, I think.
posted by serelliya at 6:31 AM on September 6, 2017

I'm assuming US:

If you choose not to go with a CD, and instead a savings account, make sure you don't go above the FDIC limit of $250k

Other commentators have noted: the safest and best bang for your buck 3-month investment is hard to identify right now, because short-term rates are so low. The 3-month T-Bill rate right now is 1%. That means a bank can either:

A) Borrow from the government for a 3-months at 1%
B) Pay you for your money X% by offering you a 3-month CD

Chances are they would prefer borrowing from the government unless you provided a discount (IE a CD yielding <1>
This gets to sandmanwv's point: The numbers are so low the return is not material. Which is why a savings account is probably better (a savings account rate is a blended rate of short and long-term rates).

You're competing with the US government, which is willing to lend at really low rates right now in the short-term.
posted by teabag at 6:45 AM on September 6, 2017

Oh the Ally no-penalty CD is interesting. Maybe worth investigating. Some quick Googling confirms its real.
posted by teabag at 6:48 AM on September 6, 2017

Ally's savings account's interest rate was just increased to 1.2% today. That seems a higher return than almost anything available short-term.
posted by General Malaise at 8:43 AM on September 6, 2017 [3 favorites]

The credit union I work at has good money market rates right now (and generally). 1.26% for under $500k and 1.36% for over. I am biased of course but I think we are a good choice!
posted by aka burlap at 9:13 AM on September 6, 2017

PatelCo has a money market account that may be competitive with a 3 month CD without the lock-in. Enter your sum in the linked form to get the rate of return.

For 10k it's 1.7%, and for 20k it's 1.1%
posted by zippy at 9:17 AM on September 6, 2017

Ally has a no penalty CD at 1.5%, I think.

Yeah, 1.5% for $25,000 or more. You might need to be registered and logged in to Ally to see that, but it says: "You can withdraw all your money any time after the first six days following the date you fund your account and keep the interest earned with no penalty."
posted by John Cohen at 10:27 AM on September 6, 2017

That's an 11-month CD.
posted by John Cohen at 10:34 AM on September 6, 2017

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