CD question

[memenee]

I will preface this by saying I am very basic with my financial knowledge, not savvy at all. I do all the basics (401k, Roth IRA, monthly investment in index fund) but that is it.

This is a very simple question about cds.

I have a sizable amount of cash in a savings account because I thought I would be using it very soon but now will not need it for 18 month. So I thought I would move it for 12 months (to be safe) to a cd and earn more than the savings acct.

Here’s the question. When I go on capital ones website, for example, it says a 12 month cd is 2.75%. When i go on my Fidelity app it says buy a cd at capital one and for 12 months it’s 4.05%. What is the difference? Can someone explain the difference and what I’m missing here? Thank you.

[lucybrown]

CD rates can vary wildly between financial institutions. You may not be missing anything. Double check the terms and if they’re the same, go with the higher one.

[chpmnk1015]

I'd call them.. there are some decent ones right now.. sometimes the higher rates are if you bring "new money" to their bank. So if u already have your money at capitol one it may not be for the higher rate. I just took some to another bank for that reason.

[dragon's breath]

There may be some "bonus" tied to buying the CD through the Fidelity link. If you still don't see it, read the fine print, because the offer may only be to new customers.

If you don't need the money for 18 months, and have not bought any I bonds this year, I would consider purchasing one of those first (limit is $10k/person electronically, the other $5k has to be done through a tax refund).

You have to hold an I bond for at least one year. If you cash it out before the end of 5 years, there will be a three month interest penalty. Even with the penalty, it is likely you'll make more with an I bond than with a CD right now.

You can only purchase an I bond through treasury direct www.treasurydirect.gov/indiv/research/indepth/ibonds/res_ibonds.htm#irate

Current interest rate is 9.62%. This would be your rate for six months if you purchase before the new rate kicks in. Next rate is not yet known, but since it is tied to inflation, it is also expected to be decently high. That rate would be your rate for the next six months. If rates drop down after that, you could hold the I bond for 15 months total and only lose that last three months of interest (at that assumed lower rate).

[memenee]

Thanks all for taking the time to respond.

dragon's breath - I will go back and read the fine print on the cap one cd via fidelity. Also re: the i bonds….I will look into the link but how is this actually purchased? Online? Or is this a paper bond I get in the mail and physically hold? What do I do at the end of the term to get my money back? Thank you!

[chpmnk1015]

The ibonds are purchased on line now. I did 5k for each of my kids a couple weeks ago and put line 8k in for me