I have bank CDs that're earning less in interest than if I simply had the $ in my savings acct. What do I do?

Question

I opened these before the rates went up. If I close them I take a hit though. Should I keep them in the CD or withdraw and place them in my savings account -- which will make me the most interest even after the hit?

I found out today that I will only be penalized 90 days of interest if it's under a year.... if over a year it's 180 days interest penalty-- my principal remains my own, untouched.

Answer 1

As mentioned by all the posters here. You have 2 options

1. Let the money sit in CD. Let it mature and then put it in savings (or another cd if it pays more at that time)

2. Pay penalty, break the CD, get money and put in savings.

To decide, do your maths. Say your CD rate is 2%. Say your bank charges you 6 months of penalty on this amount and you have 1000 dollars in that.

Your penalty = 1000 x .02 x 1/2 = 10 dollars.

Now say your savings account pays you 5% per annum i.e. 3% more than your current CD.. So, you will recover that money you paid in penalty in 4 months. So, if your CD matures within next 4 months, it makes sense to continue it. But if it matures beyond 4 months, then you are better off paying the penalty and putting money in savings account.

Answer 2

I just went through the same decision making. I left the CD alone, because if I cash it in now, I have to pay a penalty because I still have 4 mos to go until it reaches maturity. Considering that, I definately can not come out ahead by transferring it now.

Answer 3

interest on economic institution deposits is completely taxable. The IRS would not require them to deliver you a variety 1099-INT till the completed exceeds $10.00. Your final assertion for 2006 will tutor how lots substitute into paid for the twelve months. If that's below 50 cents, you may competently overlook approximately it. If that's greater beneficial than $a million.00 you ought to re-determine your taxes with it and amend your return if it adjustments your tax criminal accountability.

Answer 4

I think it depends on when they are maturing. If it is soon, leave them alone. If you opened up a long term CD, and it has 5 years to go, it would take the hit and reinvest the money.

Answer 5

Let your CD mature.Then take the money interest and all an deposit in to your savings account ! That what I'm doing anyways !