does it make sense to put $5000 into an online savings account where I have access to it whenever I want, instead of putting it in a CD that has the same percentage yield?
2007-05-15 06:37:09 · 7 answers · asked by bing 1 in Business & Finance ➔ Personal Finance
You are correct but some people would like the guarantee. CD rates are locked. Savings rates can change tomorrow. If it is money you might need, go with the savings account.
Some people will never need the money so a 5 yr CD at 5% gives them a lot of security (even though they are barely covering inflation).
The orange savings account from ing direct is popular.
2007-05-15 06:41:16 · answer #1 · answered by PJ 5 · 1⤊ 1⤋
What is your risk aversion? You may want to make sure your money will be kept safe from theft, damage or loss and as long as the bank is insured by the Federal Deposit Insurance Company (FDIC), your accounts will be insured for up to $100,000. If your credit union is insured by the National Credit Union Administration (NCUA), your accounts will also be insured for up to $100,000.
I can't think of any reason to sock your money away in a CD FOR THE SAME PERCENTAGE YIELD unless it, say, tax deferred.
Choosing your financial institution:
Shop around to find a bank that fits your needs. Call or visit at least three different banks before making a decision. Factors to take into consideration include:
What type of accounts does this bank offer?
What sort of fees does it charge and for what?
Is the bank conveniently located close to home or work?
Does this bank have convenient operating hours?
Does the bank have convenient Automated Teller Machine (ATM) locations?
Do any of the employees speak my language?
What type of identification will I need to open an account?
Can I do my banking over the phone or online?
Do I belong to a group that has formed a credit union and am I eligible to join?
Is the bank FDIC insured, or if it is a credit union is it NCUA insured?
2007-05-15 06:45:53 · answer #2 · answered by Robert S 6 · 1⤊ 1⤋
@ ING Direct for example, a 9month CD is 5.25% APY. Just for the sake of easy calculation, say that it is a 12month CD at 5.25% APY --> 5000x5.25%APY = $5262.50
Or in their online savings account -->
5000x4.5%APY = $5225.00
So it's a difference of 40 bucks or so. Less if you go with someone else at 5% APY.
So depending on what this 5k is earmarked for, I'd say keep it in a savings account. If it's for investment --> put it in a mutual fund or index fund or something. If it's an emergency fund, this is the rare exception where it might make sense to put it in a CD, because you want it guaranteed, and you would just have to pay a penalty if you break into it before the alloted time.
2007-05-15 06:48:58 · answer #3 · answered by Carl M 2 · 0⤊ 0⤋
Because the CD rate is fixed and the savings account is variable.
IMHO, it hardly matters.
2007-05-15 07:08:33 · answer #4 · answered by derek 4 · 0⤊ 0⤋
no its doenst .... do you really trust anything like that online. yeah you ahve access to it anytime you want. but how secure is that account. for all you know you may be in a scam and lose all your money to the rest of hte public that may gain access to it. and where is your money being held??? is there a bank that it is connected to? if not i would rethink putting money like that into an online savings account
2007-05-15 06:47:08 · answer #5 · answered by ? 3 · 0⤊ 1⤋
Is this really a passbook account or possibly money market or some other instrument. Are there any catches or rules. My son is a CFA and he handles most of our finances. He would have said something , I would think, if these are truly available.
2007-05-15 06:42:38 · answer #6 · answered by Ret. Sgt. 7 · 1⤊ 1⤋
Old-timers still like the face to face aspect of doing business and don't trust what they can't see.
2007-05-15 06:42:35 · answer #7 · answered by Joseph T 4 · 0⤊ 2⤋