My Cash Setup: Checking and Liquid Savings (2025/2024 Year-End)

Posted on January 14, 2025 // 19 Comments

Although I continue to monitor the best interest rates out there, in 2024 I made the conscious decision to tone down my rate-chasing and look for a lower maintenance setup that still gets a solid interest rate on my cash. Warning: This is going to be an informal, rambling post with a lot of personal opinions. Let me know what you think in the comments. I’ll list them by most activity to least activity.

Fidelity Cash Management Account (Direct Deposit and Internal Push)
I consider the Fidelity Cash Management Account my primary cashflow account. The vast majority of my household cash flows are direct deposit into my CMA, and then bill payment out via their BillPay service. In other words, I have to manually schedule any money going out. I like that I can transfer money quickly to and from my other Fidelity brokerage accounts, if necessary.

The Fidelity CMA is not a bank account. It is a full brokerage account with bank features bolted-on like a debit card, check-writing, and Bill Pay. The core position is the Fidelity Government Money Market Fund (SPAXX), which has a 4.01% 7-day yield as of 1/12/25. However, at ~40% US Government Obligations in 2023, it did not meet the requirements of having interest exempt from state taxes for California, Connecticut, and New York.

However, I use automatic recurring purchase system to keep it mostly in Fidelity Treasury Only Money Market Fund (FDLXX), which has a 4.03% 7-day yield as of 1/12/25. At ~90% US Government Obligations in 2023, it did meet the requirements of having interest exempt from state taxes for California, Connecticut, and New York. If you assume a 10% state income tax rate, this works out to a tax-effective yield of ~4.4%.

Money market funds are not FDIC-insured, but they are highly-regulated after the 2008 financial crisis and I am comfortable with their safety as they hold 90% Treasury bonds and as long as I am buying from a reputable name like Fidelity.

Fidelity uses various third parties to provide their banking features. The Fidelity debit card is issued by Leader Bank, and the debit card program is administered by BNY Mellon Investment Servicing Trust Company. Fidelity works with UMB, NA to process checks and ACH transfers. The ACH routing number for Fidelity accounts is 101205681 and belongs to UMB, NA. If you experience fraud from using the debit card, then you will have to deal with BNY Mellon. These third-party providers do not have the same level of customer service reputation as Fidelity, and Fidelity seems to punt to them, and I wish to avoid dealing with any of that.

Accordingly, I never use the Fidelity Debit Card (it is locked), and I never give out the ACH routing number and account number linked to my Fidelity CMA account (besides direct deposit). Therefore, no outside entity should have the ability to “pull” money out of my CMA account. My Fidelity CMA account is also on “Fidelity Lockdown” which prevents an unauthorized ACAT transfer of my entire account. (Lockdown does not interfere with ACH transfers.)

A reader asked if Fidelity should be treated as a “Fintech” to avoid since they use a third-party to provide some of their banking services. As you can see, I do treat them with extra care because whenever there are extra parties involved, there is room for confusion and blaming each other. However, the problem with many fintechs is that they open up what is called a “FBO” (For Benefit Of) account at their partner banks, which is a big pooled account of all their customers’ money mixed together, and then the fintech or middleman keeps a ledger of individual account balances. Even though there are routing numbers and account numbers, the bank does not open an individual account for everyone. What happens when the ledger from the fintech isn’t kept accurately? How do they split up the big pool of money? Ask the Yotta app users who completely lost access to their funds for several months, and many are still waiting to this day. Apparently, if the middleman or fintech company fails, it’s a poo show. If the bank itself failed, then the depositors would supposedly have been covered.

In my case, most funds are invested in a SEC-regulated money market fund from Fidelity inside an SIPC-insured brokerage fund.

Ally Checking and Savings (ATM card, checks, Venmo, etc)
For a long time, Ally was my primary checking and savings account. Even though they are an online bank with no physical branches and thus lower overhead costs, it still offered solid customer service and well, it simply knows to be a traditional bank. I have deposited large paper checks remotely, made large wire transfers, made large ACH transfers regularly, and used their ATM card around the world. My limited interactions found a knowledgeable human on the other side of the phone. Live chat is also available.

Their website interface is also clear and reliable, with the ability to link many external accounts (many of which won’t otherwise initiate transfers themselves) and make reasonably fast transfers between all of them. For each transfer, Ally will clearly tell me ahead of time the date that the funds will be pulled from the source account, and also the date that the funds will arrive at the destination account. I’ve moved over a million dollars in aggregate around, chasing various bonuses and bringing it back. Ally never bothered me.

The interest rate is 3.80% APY as of 1/13/25, and while that isn’t horrible, Ally used to keep themselves closer to the top rates. Given the differential is now up to a full 1% APY higher at my other options when taking into account the state tax exemption, that was enough to move some funds out. I still keep enough money at Ally to cover other cash needs (ATM card, checks, Venmo, etc).

I can keep minimal amount in Ally Checking as they offer free automatic overdraft protection from a chosen Ally Savings account. If you overdraw your checking, they just pull from Ally Savings in $100 increments on demand at no cost.

The Ally ATM card has domestic ATM rebates (up to $10 per statement cycle) and does not charge a fee on their side on international withdrawals. If I am facing a lot of international ATM fees, I can unlock my Fidelity ATM card temporarily for the rebates. However, in reality, I’d rather deal with Ally rather than Fidelity/BNY Mellon if I have a problem with a foreign ATM skimmer or something, so I just use my reliable Ally ATM card, pay the $5 or whatever, and take all the cash out I need in one transaction per trip.

Vanguard Treasury Money Market Fund
One of the main draws of keeping a Vanguard account remains that they don’t play any funny games with cash sweep. Fidelity charges what I would say is a reasonable amount for its services, while Schwab straight-up hopes you aren’t paying attention while they pay you nearly nothing. Your cash sweep is the Vanguard Federal Money Market Fund (VMFXX), which has a 4.27% 7-day yield as of 1/12/25. However, based on history it also may not qualify for state tax exemptions in any given tax year.

(Keep in mind that 7-day yields quoted on money market funds do not include compounding, so a constant 4.27% 7-day yield is the equivalent of 4.35% APY.)

For larger cash balances, I use the Vanguard Treasury Money Market Fund VUSXX which has a 4.34% 7-day yield as of 1/10/25. At ~80% US Government Obligations in 2023, it did meet the requirements of having interest exempt from state taxes for California, Connecticut, and New York. If you assume a 10% state income tax rate, this works out to a tax-effective yield of ~4.8%. This is as good as the top 1% of savings rates out there.

I don’t use VUSXX for any bank features, so there is little need to contact customer service. It just earns a reliably high interest rate due to its low expense ratio (0.09%) and mostly holding short-term US Treasury bonds directly.

Note: An honorable mention goes out to iShares 0-3 Month Treasury Bond ETF (SGOV), which has the same low expense ratio (0.09%). Trading it will expose you to a small bid/ask spread of about 0.01% for each trade, though. But if I’m holding at some new brokerage for a while, then SGOV is my go-to cash equivalent holding.

The rest
I maintain minimal balances in a local megabank bank account and a local credit union account, in case a physical bank branch is useful for whatever reason – unlimited ATM access, cash deposits/withdrawals, safety deposit box, notary, medallion guarantee, etc.

I also have some existing certificates of deposit from credit unions that I am waiting to mature, like the 5-year 5.00% APY CD I bought in 2023. I just don’t like the idea of my wife having to track down four different credit unions one day to piece together my crazy CD ladder.

Recap. My simplified cash setup utilizes existing brokerage account relationships and the fact that US Treasury interest is exempt from state income taxes to maximize my tax-effective yield earned on cash while minimizing the work required to chase rates across several smaller banks, fintechs, and credit unions. It also minimizes exposure to poor customer service. I maintain liquid access to cash, and my top option pays roughly an effective 4.80% APY, and overall is quite competitive with what I could achieve if I did constantly chase rates.

Filed Under: Banking //

Best Interest Rates Survey: Savings Accounts, Treasuries, CDs, ETFs – January 2025

Posted on January 12, 2025 // Leave a Comment

Here’s my monthly survey of the best interest rates on cash as of January, roughly sorted from shortest to longest maturities. Banks love taking advantage of our tendency for idle cash, and you can often earning more money while keeping the same level of safety by moving to another FDIC-insured bank or NCUA-insured credit union. Check out my Ultimate Rate-Chaser Calculator to see how much extra interest you could earn from switching. Rates listed are available to everyone nationwide. Rates checked as of 1/10/2024.

TL;DR: Liquid, short-term rates are lower overall by roughly 0.25%. Very few at or near 5% APY liquid savings now. Longer-term rates actually went up a little; there are 4%+ APY 5-year CDs. Compare against Treasury bills and bonds at every maturity, taking into account state tax exemption. I no longer recommend fintech companies due to the possibility of loss due to poor recordkeeping and/or fraud.

High-yield savings accounts
Since the huge megabanks still pay essentially no interest, everyone should at least have a separate, no-fee online savings account to piggy-back onto your existing checking account. The interest rates on savings accounts can drop at any time, so I list the top rates as well as competitive rates from banks with a history of competitive rates and solid user experience. Some banks will bait you with a temporary top rate and then lower the rates in the hopes that you are too lazy to leave.

  • The top saving rates at the moment include TIMBR at 4.80% APY ($1k min) and Peak Bank at 4.75% APY ($100 min). Roger.bank is another new arrival at 5.00% APY (no min), but does require an additional checking account. Most others have dropped at least a little. For example, CIT Platinum Savings is now at 4.35% APY with $5,000+ balance.
  • SoFi Bank is at 4.00% APY + up to $325 new account bonus with direct deposit. You must maintain a direct deposit of any amount (even $1) each month for the higher APY. SoFi has historically competitive rates and full banking features. See details at $25 + $300 SoFi Money new account and deposit bonus.
  • Here is a limited survey of high-yield savings accounts. They aren’t the top rates, but a group that have historically kept it relatively competitive such that I like to track their history.

Short-term guaranteed rates (1 year and under)
A common question is what to do with a big pile of cash that you’re waiting to deploy shortly (plan to buy a house soon, just sold your house, just sold your business, legal settlement, inheritance). My usual advice is to keep things simple and take your time. If not a savings account, then put it in a flexible short-term CD under the FDIC limits until you have a plan.

  • No Penalty CDs offer a fixed interest rate that can never go down, but you can still take out your money (once) without any fees if you want to use it elsewhere. Marcus has a 7mo/9mo/11mo No Penalty CD at 4.00% APY with a $500 minimum deposit. Farmer’s Insurance FCU has 9-month No Penalty CD at 4.25% APY with a $1,000 minimum deposit. Consider opening multiple CDs in smaller increments for more flexibility.
  • Abound Credit Union has a 8-month certificate special at 4.75% APY ($500 min). Anyone can join this credit union nationwide with $10 fee. Early withdrawal penalty is 90 days of interest.

Money market mutual funds
Many brokerage firms that pay out very little interest on their default cash sweep funds (and keep the difference for themselves). Note: Money market mutual funds are highly-regulated, but ultimately not FDIC-insured, so I would still stick with highly reputable firms.

  • Vanguard Federal Money Market Fund (VMFXX) is the default sweep option for Vanguard brokerage accounts, which has an SEC yield of 4.28% (changes daily, but also works out to a compound yield of 4.36%, which is better for comparing against APY). Odds are this is much higher than your own broker’s default cash sweep interest rate.
  • Vanguard Treasury Money Market Fund (VUSXX) is an alternative money market fund which you must manually purchase, but the interest will be mostly (80% for 2023 tax year) exempt from state and local income taxes because it comes from qualifying US government obligations. Current SEC yield of 4.35% (compound yield of 4.44%).

Treasury Bills and Ultra-short Treasury ETFs
Another option is to buy individual Treasury bills which come in a variety of maturities from 4-weeks to 52-weeks and are fully backed by the US government. You can also invest in ETFs that hold a rotating basket of short-term Treasury Bills for you, while charging a small management fee for doing so. T-bill interest is exempt from state and local income taxes, which can make a significant difference in your effective yield.

  • You can build your own T-Bill ladder at TreasuryDirect.gov or via a brokerage account with a bond desk like Vanguard and Fidelity. Here are the current Treasury Bill rates. As of 1/10/25, a new 4-week T-Bill had the equivalent of 4.31% annualized interest and a 52-week T-Bill had the equivalent of 4.24% annualized interest.
  • The iShares 0-3 Month Treasury Bond ETF (SGOV) has a 4.48% SEC yield (0.09% expense ratio) and effective duration of 0.10 years. SPDR Bloomberg Barclays 1-3 Month T-Bill ETF (BIL) has a 4.34% SEC yield (0.136% expense ratio) and effective duration of 0.08 years.

US Savings Bonds
Series I Savings Bonds offer rates that are linked to inflation and backed by the US government. You must hold them for at least a year. If you redeem them within 5 years there is a penalty of the last 3 months of interest. The annual purchase limit for electronic I bonds is $10,000 per Social Security Number, available online at TreasuryDirect.gov.

  • “I Bonds” bought between November 2024 and April 2025 will earn a 3.11% rate for the first six months. The rate of the subsequent 6-month period will be based on inflation again. More on Savings Bonds here.
  • In mid-April 2025, the CPI will be announced and you will have a short period where you will have a very close estimate of the rate for the next 12 months. I will have another post up at that time.

Rewards checking accounts
These unique checking accounts pay above-average interest rates, but with unique risks. You have to jump through certain hoops which usually involve 10+ debit card purchases each cycle, a certain number of ACH/direct deposits, and/or a certain number of logins per month. If you make a mistake (or they judge that you did) you risk earning zero interest for that month. Some folks don’t mind the extra work and attention required, while others would rather not bother. Rates can also drop suddenly, leaving a “bait-and-switch” feeling.

  • OnPath Federal Credit Union (my review) pays 7.00% APY on up to $10,000 if you make 15 debit card purchases, opt into online statements, and login to online or mobile banking once per statement cycle. Anyone can join this credit union via $5 membership fee to join partner organization. You can also get a $100 Visa Reward card when you open a new account and make qualifying transactions.
  • Genisys Credit Union pays 6.75% APY on up to $7,500 if you make 10 debit card purchases of $5+ each per statement cycle, and opt into online statements. Anyone can join this credit union via $5 membership fee to join partner organization.
  • La Capitol Federal Credit Union pays 6.25% APY on up to $10,000 if you make 15 debit card purchases of at least $5 each per statement cycle. Anyone can join this credit union via partner organization, Louisiana Association for Personal Financial Achievement ($20).
  • NEW: Falcon National Bank pays 6.00% APY on up to $25,000 if you make at least 15 debit card purchases, 1 direct deposit OR ACH credit transaction, and enroll in online statements.
  • Credit Union of New Jersey pays 6.00% APY on up to $25,000 if you make 12 debit card purchases, opt into online statements, and make at least 1 direct deposit, online bill payment, or automatic payment (ACH) per statement cycle. Anyone can join this credit union via $5 membership fee to join partner organization.
  • Andrews Federal Credit Union pays 6.00% APY on up to $25,000 if you make 15 debit card purchases, opt into online statements, and make at least 1 direct deposit or ACH transaction per statement cycle. Anyone can join this credit union via partner organization.
  • Find a locally-restricted rewards checking account at DepositAccounts.

Certificates of deposit (greater than 1 year)
CDs offer higher rates, but come with an early withdrawal penalty. By finding a bank CD with a reasonable early withdrawal penalty, you can enjoy higher rates but maintain access in a true emergency. Alternatively, consider building a CD ladder of different maturity lengths (ex. 1/2/3/4/5-years) such that you have access to part of the ladder each year, but your blended interest rate is higher than a savings account. When one CD matures, use that money to buy another 5-year CD to keep the ladder going. Some CDs also offer “add-ons” where you can deposit more funds if rates drop.

  • KS State Bank has a 5-year certificate at 4.25% APY ($500 minimum), 4-year at 4.25% APY, 3-year at 4.20% APY, 2-year at 4.20% APY, and 1-year at 4.30% APY. $500 minimum. The early withdrawal penalty (EWP) for the 5-year is a huge 540 days of interest.
  • Mountain America Credit Union (MACU) has a 5-year certificate at 4.25% APY ($500 minimum), 4-year at 4.20% APY, 3-year at 4.15% APY, 2-year at 3.95% APY, and 1-year at 4.25% APY. Early withdrawal penalty for the 4-year and 5-year is 365 days of interest. Anyone can join this credit union via partner organization American Consumer Council for a one-time $5 fee (or try promo code “consumer”).
  • You can buy certificates of deposit via the bond desks of Vanguard and Fidelity. You may need an account to see the rates. These “brokered CDs” offer FDIC insurance and easy laddering, but they don’t come with predictable early withdrawal penalties. Right now, I see a 5-year non-callable CD at 4.10% APY (callable: no, call protection: yes). Be warned that both Vanguard and Fidelity will list higher rates from callable CDs, which importantly means they can call back your CD if rates drop later. (Issuers have indeed started calling some of their old 5%+ CDs during 2024.)

Longer-term Instruments
I’d use these with caution due to increased interest rate risk (tbh, I don’t use them at all), but I still track them to see the rest of the current yield curve.

  • Willing to lock up your money for 10 years? You can buy long-term certificates of deposit via the bond desks of Vanguard and Fidelity. These “brokered CDs” offer FDIC insurance, but they don’t come with predictable early withdrawal penalties. You might find something that pays more than your other brokerage cash and Treasury options. Right now, I see a 10-year CDs at 4.00% (non-callable) vs. 4.77% for a 10-year Treasury. Watch out for higher rates from callable CDs where they can call your CD back if interest rates drop.

All rates were checked as of 1/10/2024.

Photo by Giorgio Trovato on Unsplash

Filed Under: Banking, Deals & Offers, Investing // Tagged:

PSECU $300 New Checking Account Bonus (Updated 2025)

Posted on January 8, 2025 // 11 Comments

Updated with 2025 promo details. Pennsylvania State Employees Credit Union (PSECU) has a $300 new checking account bonus. That is also my referral link as I successfully did a similar $300 deal previously. PSECU is a digital-first credit union with a very open membership. If you don’t satisfy the available free options, anyone can join with $10:

Don’t meet any of the criteria above? No problem! You can still become eligible for PSECU membership by joining the Pennsylvania Recreation and Park Society (PRPS).

PRPS is a statewide association providing education, advocacy, and resources for those working and volunteering to manage Pennsylvania’s 6,000+ local parks. Park and recreation departments provide safe and affordable recreation opportunities, creating stronger and more inclusive communities.

PRPS membership dues are $20, but we cover $10 when you select to join PRPS during our application process.

There may also be a required $5 initial deposit into a share savings account. I also experienced a hard credit check on Experian when I joined over a year ago, but more recent reports are that they have switched to a soft pull. Here are the details on the bonus requirements:

$300 Checking Bonus Requirements

  • Become a PSECU member using promo link and promo code 300REFER (should be automatically applied) and be approved for at least one savings and one checking account with debit card.
  • Sign up and log into digital banking (online or mobile).
  • Set up and receive 2 Qualifying Payroll Direct Deposit(s), each of $500 or more, into either the new savings or checking accounts.
  • Above must be completed within 100 days of establishing your membership.

My application process went smoothly and similar to other credit unions. I did have to upload a scan of the front and back of my driver’s license to help verify my identity (which is a good thing in my opinion) as well as answer some identity verification questions based on my credit report. The application took a couple days to process but I was able to get my account information and online access without any phone call or paperwork required. I did have to call them briefly to get my checking account number (didn’t want to wait on the free checks to arrive) in order to set up my direct deposit. My bonus arrived without issue and as promised.

One bonus per tax ID, so a couple could each open their own PSECU accounts and get $300 each even if they live in the same household.

Greenlight perk. Another useful perk of PSECU for those with kids and teens is they include a free Greenlight subscription, which is a popular reloadable debit card service for kids. This is usually $5 a month ($60 a year). Here’s my Greenlight Kids Debit Card review.

More fine print:

$300 New Member Bonus Terms and Conditions

From 1.1.25 to 12.31.25, PSECU is running a new member incentive bonus. To receive $300, new members must sign up with promotional code 300REFER and satisfy each of the requirements listed below. After the first 100 days from establishing membership, your status to receive the bonus will be assessed and processed, which can take up to 45 days. This means, if all requirements are met, you can expect your bonus to be deposited into your Regular savings share within 145 days from establishing membership. Promotion open to U.S. Residents who are 18 years of age or older at the time membership is established. Limit one (1) new member $300 New Member Bonus per tax identification number used to open a new PSECU account. Joint owners listed on accounts are not eligible to be rewarded for this bonus unless they open their own account. You will not be eligible for the $300 New Member Bonus if you are a current PSECU member, have closed an account within the past 12 months, or have received any new member incentive bonus within the past 12 months.

Qualifying Payroll Direct Deposits are defined as paychecks, Social Security payments, and pension payment.

The following are not Qualifying Direct Deposits: person to person transfers (P2P), demand deposit account to demand deposit account transfers (for example, from a checking account to another checking account), and deposits or ACH transfers not from an employer or the government (for example, online transfers or bank transfers).

Filed Under: Banking, Deals & Offers //

2024 Year-End Review: Annual Broad Asset Class & Target Fund Returns

Posted on January 2, 2025 // 1 Comment

Happy New Year! 🎉 🥳 Let’s see how the year went for the broad asset classes that I track. Per Morningstar, here are the total annual returns (includes price appreciation and dividends/interest) for select asset classes as benchmarked by popular ETFs after market close 12/31/24.

I didn’t include Bitcoin or any other crypto because I honestly don’t track it, don’t own it as part of my long-term portfolio, and would not advise my family to own it. However, I acknowledge that it went up something like 120% this year.

The “set and forget” Vanguard Target Retirement 2055 fund (VFFVX) , currently consisting of roughly 90% diversified stocks and 10% bonds, was up 14.6% in 2023.

Commentary. 2024 again shows that you want to stay in the game. If you waited on the sidelines because stocks have historically high valuations and you were waiting for a dip… well, that didn’t work out. The S&P 500 had two great years in a row, the best two consecutive years in over 25 years according to the WSJ (gift article):

Historically, the S&P 500 annual return is negative in roughly every 1 in 4 years. But holding through that volatility is part of the price you pay for the long-term returns. For most of us, the best we can do is to “stay the course” and enjoy the up years while knowing that the down years will inevitably be sprinkled in there. I try my best not to skip and ignore all the predictions, or even listen to daily market close announcements. If you stand by the roulette table and stare long enough at the red and black numbers that come up, your mind will start to find patterns where they don’t exist.

Instead, here are your cumulative returns through the end of 2024 if you had been a steady investor in the Vanguard Target Retirement 2055 fund over the past several years, despite the many, many problems of the world:

(These work great inside 401ks and IRAs. I’d avoid buying Target Retirement funds in a taxable account.)

Holding cash would have been a lot less scary, but the returns would have been a lot less impressive. I will post more about my personal portfolio changes and performance shortly.

Filed Under: Banking, Investing, Retirement //

Best Interest Rates Survey: Savings Accounts, Treasuries, CDs, ETFs – December 2024

Posted on December 15, 2024 // 12 Comments

Here’s my monthly roundup of the best interest rates on cash as of December 2024, roughly sorted from shortest to longest maturities. There are lesser-known opportunities available to individual investors, often earning more money while keeping the same level of safety by moving to another FDIC-insured bank or NCUA-insured credit union. Check out my Ultimate Rate-Chaser Calculator to see how much extra interest you could earn from switching. Rates listed are available to everyone nationwide. Rates checked as of 12/15/2024.

TL;DR: Slightly lower overall in the short-term. Only a few around 5% APY now. Still some 4%+ APY 5-year CDs. Compare against Treasury bills and bonds at every maturity, taking into account state tax exemption. I no longer recommend fintech companies due to the possibility of loss due to poor recordkeeping and/or fraud.

High-yield savings accounts
Since the huge megabanks still pay essentially no interest, everyone should at least have a separate, no-fee online savings account to piggy-back onto your existing checking account. The interest rates on savings accounts can drop at any time, so I list the top rates as well as competitive rates from banks with a history of competitive rates and solid user experience. Some banks will bait you with a temporary top rate and then lower the rates in the hopes that you are too lazy to leave.

  • The top rates at the moment are from newcomers TIMBR at 5.05% APY and Pibank at 5.00% APY. I have no personal experience with either, but they are the top rates at the moment. Most others have dropped at least a little. For example, CIT Platinum Savings is now at 4.55% APY with $5,000+ balance.
  • SoFi Bank is at 4.00% APY + up to $325 new account bonus with direct deposit. You must maintain a direct deposit of any amount (even $1) each month for the higher APY. SoFi has historically competitive rates and full banking features. See details at $25 + $300 SoFi Money new account and deposit bonus.
  • Here is a limited survey of high-yield savings accounts. They aren’t the top rates, but a group that have historically kept it relatively competitive such that I like to track their history.

Short-term guaranteed rates (1 year and under)
A common question is what to do with a big pile of cash that you’re waiting to deploy shortly (plan to buy a house soon, just sold your house, just sold your business, legal settlement, inheritance). My usual advice is to keep things simple and take your time. If not a savings account, then put it in a flexible short-term CD under the FDIC limits until you have a plan.

  • No Penalty CDs offer a fixed interest rate that can never go down, but you can still take out your money (once) without any fees if you want to use it elsewhere. Marcus has a 7mo/9mo/11mo No Penalty CD at 4.00% APY with a $500 minimum deposit. Farmer’s Insurance FCU has 9-month No Penalty CD at 4.50% APY with a $1,000 minimum deposit. Consider opening multiple CDs in smaller increments for more flexibility.
  • Langley Federal Credit Union has a 10-month certificate special at 5.25% APY ($500 min, $50,000 max). This is a promo for new members only. Anyone can join this credit union nationwide; you must maintain $5 in their share savings account. Early withdrawal penalty is 90 days of interest.

Money market mutual funds
Many brokerage firms that pay out very little interest on their default cash sweep funds (and keep the difference for themselves). Note: Money market mutual funds are highly-regulated, but ultimately not FDIC-insured, so I would still stick with highly reputable firms.

  • Vanguard Federal Money Market Fund (VMFXX) is the default sweep option for Vanguard brokerage accounts, which has an SEC yield of 4.54% (changes daily, but also works out to a compound yield of 4.64%, which is better for comparing against APY). Odds are this is much higher than your own broker’s default cash sweep interest rate.
  • Vanguard Treasury Money Market Fund (VUSXX) is an alternative money market fund which you must manually purchase, but the interest will be mostly (80% for 2023 tax year) exempt from state and local income taxes because it comes from qualifying US government obligations. Current SEC yield of 4.49% (compound yield of 4.58%).

Treasury Bills and Ultra-short Treasury ETFs
Another option is to buy individual Treasury bills which come in a variety of maturities from 4-weeks to 52-weeks and are fully backed by the US government. You can also invest in ETFs that hold a rotating basket of short-term Treasury Bills for you, while charging a small management fee for doing so. T-bill interest is exempt from state and local income taxes, which can make a significant difference in your effective yield.

  • You can build your own T-Bill ladder at TreasuryDirect.gov or via a brokerage account with a bond desk like Vanguard and Fidelity. Here are the current Treasury Bill rates. As of 12/13/24, a new 4-week T-Bill had the equivalent of 4.31% annualized interest and a 52-week T-Bill had the equivalent of 4.24% annualized interest.
  • The iShares 0-3 Month Treasury Bond ETF (SGOV) has a 4.88% SEC yield (this looks old) and effective duration of 0.10 years. SPDR Bloomberg Barclays 1-3 Month T-Bill ETF (BIL) has a 4.42% SEC yield and effective duration of 0.08 years.

US Savings Bonds
Series I Savings Bonds offer rates that are linked to inflation and backed by the US government. You must hold them for at least a year. If you redeem them within 5 years there is a penalty of the last 3 months of interest. The annual purchase limit for electronic I bonds is $10,000 per Social Security Number, available online at TreasuryDirect.gov.

  • “I Bonds” bought between November 2024 and April 2025 will earn a 3.11% rate for the first six months. The rate of the subsequent 6-month period will be based on inflation again. More on Savings Bonds here.
  • In mid-April 2025, the CPI will be announced and you will have a short period where you will have a very close estimate of the rate for the next 12 months. I will have another post up at that time.

Rewards checking accounts
These unique checking accounts pay above-average interest rates, but with unique risks. You have to jump through certain hoops which usually involve 10+ debit card purchases each cycle, a certain number of ACH/direct deposits, and/or a certain number of logins per month. If you make a mistake (or they judge that you did) you risk earning zero interest for that month. Some folks don’t mind the extra work and attention required, while others would rather not bother. Rates can also drop suddenly, leaving a “bait-and-switch” feeling.

  • OnPath Federal Credit Union (my review) pays 7.00% APY on up to $10,000 if you make 15 debit card purchases, opt into online statements, and login to online or mobile banking once per statement cycle. Anyone can join this credit union via $5 membership fee to join partner organization. You can also get a $100 Visa Reward card when you open a new account and make qualifying transactions.
  • Genisys Credit Union pays 6.75% APY on up to $7,500 if you make 10 debit card purchases of $5+ each per statement cycle, and opt into online statements. Anyone can join this credit union via $5 membership fee to join partner organization.
  • La Capitol Federal Credit Union pays 6.25% APY on up to $10,000 if you make 15 debit card purchases of at least $5 each per statement cycle. Anyone can join this credit union via partner organization, Louisiana Association for Personal Financial Achievement ($20).
  • NEW: Falcon National Bank pays 6.00% APY on up to $25,000 if you make at least 15 debit card purchases, 1 direct deposit OR ACH credit transaction, and enroll in online statements.
  • Credit Union of New Jersey pays 6.00% APY on up to $25,000 if you make 12 debit card purchases, opt into online statements, and make at least 1 direct deposit, online bill payment, or automatic payment (ACH) per statement cycle. Anyone can join this credit union via $5 membership fee to join partner organization.
  • Andrews Federal Credit Union pays 6.00% APY on up to $25,000 if you make 15 debit card purchases, opt into online statements, and make at least 1 direct deposit or ACH transaction per statement cycle. Anyone can join this credit union via partner organization.
  • Find a locally-restricted rewards checking account at DepositAccounts.

Certificates of deposit (greater than 1 year)
CDs offer higher rates, but come with an early withdrawal penalty. By finding a bank CD with a reasonable early withdrawal penalty, you can enjoy higher rates but maintain access in a true emergency. Alternatively, consider building a CD ladder of different maturity lengths (ex. 1/2/3/4/5-years) such that you have access to part of the ladder each year, but your blended interest rate is higher than a savings account. When one CD matures, use that money to buy another 5-year CD to keep the ladder going. Some CDs also offer “add-ons” where you can deposit more funds if rates drop.

  • Credit Human has a 59-month CD at 4.11% APY. 48-month at 4.11% APY. 35-month at 4.25% APY. 23-month at 4.30% APY. 1-year at 4.40% APY. $500 minimum. The early withdrawal penalty (EWP) for CD maturities of 36 months or more is 365 days of interest. For CD maturity of 1 year, the EWP is 270 days of interest. This is actually a credit union, but is open nationwide with a American Consumer Council (ACC) membership. Try promo code “consumer” when signing up at ACC for a free membership.
  • Synchrony Bank has a 5-year certificate at 4.00% APY (no minimum), 4-year at 3.50% APY, 3-year at 3.75% APY, 2-year at 3.50% APY, and 1-year at 4.00% APY. Early withdrawal penalty for the 4-year and 5-year is 365 days of interest.
  • BMO Alto has a 5-year CD at 3.90% APY. 4-year at 3.80% APY. 3-year at 3.80% APY. 2-year at 3.80% APY. 1-year at 4.20% APY. No minimum. The early withdrawal penalty (EWP) for CD maturities of 1 year or more is 180 days of interest. For CD maturities of 11 months or less, the EWP is 90 days of interest. However, note that they reserve the right to prohibit early withdrawals entirely (!). Online-only subsidiary of BMO Bank.
  • You can buy certificates of deposit via the bond desks of Vanguard and Fidelity. You may need an account to see the rates. These “brokered CDs” offer FDIC insurance and easy laddering, but they don’t come with predictable early withdrawal penalties. Right now, I see a 5-year non-callable CD at 3.90% APY (callable: no, call protection: yes). Be warned that both Vanguard and Fidelity will list higher rates from callable CDs, which importantly means they can call back your CD if rates drop later. (Issuers have indeed started calling some of their old 5%+ CDs during 2024.)

Longer-term Instruments
I’d use these with caution due to increased interest rate risk (tbh, I don’t use them at all), but I still track them to see the rest of the current yield curve.

  • Willing to lock up your money for 10 years? You can buy long-term certificates of deposit via the bond desks of Vanguard and Fidelity. These “brokered CDs” offer FDIC insurance, but they don’t come with predictable early withdrawal penalties. You might find something that pays more than your other brokerage cash and Treasury options. Right now, I see a 10-year CDs at [n/a] (non-callable) vs. 4.40% for a 10-year Treasury. Watch out for higher rates from callable CDs where they can call your CD back if interest rates drop.

All rates were checked as of 12/15/2024.

Photo by Giorgio Trovato on Unsplash

Filed Under: Banking, Deals & Offers, Investing // Tagged:

Vanguard Announces New Treasury Bill ETFs: New Best Cash Alternative?

Posted on December 3, 2024 // 3 Comments

Vanguard recently released an announcement that in “First Quarter 2025” they will be releasing two new index ETFs that both hold short-term US Treasury Bonds:

  • Vanguard 0-3 Month Treasury Bill ETF (VBIL). Holds Treasuries with maturities of 3 months or less. Estimated expense ratio of 0.07%.
  • Vanguard Ultra-Short Treasury ETF (VGUS). Holds Treasuries with maturities of less than 12 months. Estimated expense ratio of 0.07%.

Currently, I would say the two best options for those who want low-cost exposure to Treasury Bills as a cash alternative without having to manually manage their own T-Bill ladder are:

  • iShares 0-3 Month Treasury Bond ETF (SGOV). Holds Treasuries with maturities of 3 months or less (1.2 months weighted average as of 12/2024). Expense ratio of 0.09%. 30-day historical median bid/ask spread of 0.01%. Can be bought and sold at nearly any brokerage.
  • Vanguard Treasury Money Market Fund (VUSXX). Maintains a NAV of $1. Holds Treasuries with average maturity of 38 days (as of 10/31/24). Expense ratio of 0.09%. Usually must be bought and sold within a Vanguard brokerage accounts to avoid transaction fees.

The advantages of owning properly-managed T-Bill funds are that you hopefully maintain the state income tax exemption of T-Bill interest, while adding the convenience and easy liquidity of ETFs and mutual funds. T-Bills often give residents of states with high local/state income taxes the highest tax-equivalent yield available for a cash equivalent (minimal volatility, minimal principal risk).

For tax year 2023, SGOV reported 96.45% of interest was derived from qualified U.S. Government and agency obligations. In many states, this meant that 96.45% of the interest paid out was exempt from state and local income taxes.

For tax year 2023, VUSXX reported 80.06% of interest was derived from qualified U.S. Government and agency obligations. In many states, this means that 80.06% of the interest paid out was exempt from state and local income taxes.

Ideally, VBIL will be very similar to SGOV with a tight bid/ask spread and nearly all interest eligible for state income tax exemption, but with even lower expenses and thus higher net yields. Something to keep a look out for in early 2025.

Filed Under: Banking, Investing //

TreasuryDirect Customer Service Delays and Estate Planning Concerns

Posted on November 17, 2024 // 14 Comments

TreasuryDirect.gov is the official site for individuals to directly purchase US savings bonds and US Treasury bonds, including new T-Bills and TIPS at auction. But is it still worth the hassle? Back in August 2024, TreasuryDirect sent me the following e-mail when converting my paper bonds to electronic:

Cases are worked in the order they are received in our office. Your request is important to us and will receive attention as soon as possible. Please be aware of our estimated processing times to process your case which are based on the case type (bolding is mine):

Cases requesting to cash Series EE and/or Series I paper savings bonds held in your name, at least 4 weeks.
Cases requesting to cash Series HH savings bonds held in your name, at least 3 months.
Unlocking your TreasuryDirect account, updating bank information in that account, or converting your paper savings bonds into electronic bonds in TreasuryDirect, at least 4 weeks.
Claims for missing, lost, or stolen bonds, at least 6 months.
All other cases, at least 20 weeks.
If we require additional information to process your case, we will contact you. Thank you for your patience.

That’s at least a month for some pretty basic stuff like unlocking your account because you forgot what you said was your favorite movie. In October 2024, the WSJ published TreasuryDirect to Bond Buyers: Moving Your Money Could Take a Year regarding long delays transferring Treasury bonds to outside brokerages.

The resulting customer service backlog is straining the Treasury Department’s antiquated system, which can require verified signatures and paper forms sent through the mail. People transferring securities from TreasuryDirect to third-party brokerages face especially long waits because those requests are processed manually, according to people familiar with the matter.

TreasuryDirect tries to complete most of them within six weeks, but can take 12 months, depending on capacity. A notice on the TreasuryDirect website says some customer service requests “may require 12 months or more to process.” The notice had said the longest delays were about six months until the end of July.

Finally, there are multiple posts on the Bogleheads, Early Retirement, and Reddit forums about the difficulties of dealing with TreasuryDirect after the account owner passes away. Here’s one example from a user that was already familiar with the website, knew all the account information, and had the beneficiaries assigned correctly, but still encountered multiple forms, conflicting instructions, and months of delays – Treasury Direct – The Eternal Wait and No Way To Track Transfer:

I’m closing in on 3 months waiting for Treasury Direct to transfer several EE bonds and an I bond that were in my dad’s online Treasury Direct account to my online Treasury Direct account. My dad passed away at the end of December 2022 and I was registered as the beneficiary with POD on all of the bonds.

And the follow-up (emphasis mine):

My dad’s I bonds were transferred to me around the 4-5 month mark.

After that experience, I decided to liquidate all of my TD accounts, and will encourage my husband to do the same. I personally don’t want a repeat of this experience, or make my heirs go through such a lengthy process in resolving my estate.

What I learned from this experience is to not discount how much stress and mental bandwidth it takes to deal with TD when you’re also grieving the loss of a family member, and trying to settle the estate so you can move on financially.

Another similar estate horror story here.

Takeaway #1: Expect and prepare for slow service. It’s very clear that TreasuryDirect is an underfunded government program with very limited resources. Even most mega banks no longer cash in old paper savings bonds, so that has increased their workload as well. Any time there is a surge in demand, either due to relatively attractive rates on savings bonds or Treasury bills, they are going to get backed up. If you happen to lock yourself out of your account during one of these times, it may take months to fix it! Be very careful before you close that old bank account linked through TreasuryDirect. Use a reliable password manager, and be sure to add your answers to questions like “Who is your favorite child?”. Be sure to note your account information in multiple documents, in case someone needs to find it.

Takeaway #2: Never use TreasuryDirect for anything besides US savings bonds. TreasuryDirect.gov is the only place where you can purchase US savings bonds, but it is not the only place you can buy individual Treasury bonds and TIPS. Just open an account with a broker with better resources and a bond desk like Fidelity, Schwab, or Vanguard and go through them.

Takeaway #3: Consider your heirs and simplifying your accounts as you age. In my opinion, I would also avoid TreasuryDirect if you are older and you don’t want to burden your estate executors with dealing with TreasuryDirect. You can save them several months and many hours of calls and paperwork by liquidating your assets and consolidating them elsewhere. TreasuryDirect will likely take the longest to resolve out of all of your financial accounts.

Personally, I continue to gradually liquidate the savings bonds in my TreasuryDirect account and buying individual TIPS in an outside brokerage account instead. I will have to pay some taxes on the deferred interest, but since I am getting a 1% to 2% higher fixed rate via TIPS in many cases, it’s not that bad. I also worry that my survivors might completely overlook this account if something unexpected happens (there are no mailed paper statements, or even monthly e-mails of online statements.) I’d like to minimize any unnecessary headaches and consider this part of my overall portfolio simplification process.

If I was younger and still grinding for every small edge, I would probably still accept these shortcomings for the right interest rate and tax deferral properties, but nowadays the calculations are different.

Image source: Sitejabber

Filed Under: Banking, Estate Planning, Investing, Savings Bonds, Treasury Bills and Bonds //

Best Interest Rates Survey: Savings Accounts, Money Markets, Treasuries, CDs, ETFs – November 2024

Posted on November 12, 2024 // 6 Comments

Here’s my monthly roundup of the best interest rates on cash as of November 2024, roughly sorted from shortest to longest maturities. There are lesser-known opportunities available to individual investors, often earning more money while keeping the same level of safety by moving to another FDIC-insured bank or NCUA-insured credit union. Check out my Ultimate Rate-Chaser Calculator to see how much extra interest you could earn from switching. Rates listed are available to everyone nationwide. Rates checked as of 11/12/2024.

TL;DR: Fed lowered rates again; slight drops are continuing on average. Still some 5%+ savings accounts. Still some 4%+ APY 5-year CDs. Compare against Treasury bills and bonds at every maturity, taking into account state tax exemption. I no longer recommend fintech companies due to the possibility of loss due to poor recordkeeping and/or fraud.

High-yield savings accounts
Since the huge megabanks still pay essentially no interest, everyone should at least have a separate, no-fee online savings account to piggy-back onto your existing checking account. The interest rates on savings accounts can drop at any time, so I list the top rates as well as competitive rates from banks with a history of competitive rates and solid user experience. Some banks will bait you with a temporary top rate and then lower the rates in the hopes that you are too lazy to leave.

  • The top rates at the moment are from newcomers Pibank at 5.50% APY and TIMBR at 5.25% APY. I have no personal experience with either, but they are the top rates at the moment. Most others have dropped at least a little. For example, CIT Platinum Savings is now at 4.55% APY with $5,000+ balance.
  • SoFi Bank is at 4.20% APY + up to $325 new account bonus with direct deposit. You must maintain a direct deposit of any amount (even $1) each month for the higher APY. SoFi has historically competitive rates and full banking features. See details at $25 + $300 SoFi Money new account and deposit bonus.
  • Here is a limited survey of high-yield savings accounts. They aren’t the top rates, but a group that have historically kept it relatively competitive such that I like to track their history. Kind of an index like the Dow or S&P 500.

Short-term guaranteed rates (1 year and under)
A common question is what to do with a big pile of cash that you’re waiting to deploy shortly (plan to buy a house soon, just sold your house, just sold your business, legal settlement, inheritance). My usual advice is to keep things simple and take your time. If not a savings account, then put it in a flexible short-term CD under the FDIC limits until you have a plan.

  • No Penalty CDs offer a fixed interest rate that can never go down, but you can still take out your money (once) without any fees if you want to use it elsewhere. Marcus has a 7mo/9mo/11mo No Penalty CD at 3.90% APY with a $500 minimum deposit. Farmer’s Insurance FCU has 9-month No Penalty CD at 4.50% APY with a $1,000 minimum deposit. Consider opening multiple CDs in smaller increments for more flexibility.
  • Langley Federal Credit Union has a 10-month certificate special at 5.25% APY ($500 min, $50,000 max). This is a promo for new members only. Anyone can join this credit union nationwide; you must maintain $5 in their share savings account. Early withdrawal penalty is 90 days of interest.

Money market mutual funds
Many brokerage firms that pay out very little interest on their default cash sweep funds (and keep the difference for themselves). Note: Money market mutual funds are highly-regulated, but ultimately not FDIC-insured, so I would still stick with highly reputable firms.

  • Vanguard Federal Money Market Fund (VMFXX) is the default sweep option for Vanguard brokerage accounts, which has an SEC yield of 4.67% (changes daily, but also works out to a compound yield of 4.77%, which is better for comparing against APY). Odds are this is much higher than your own broker’s default cash sweep interest rate.
  • Vanguard Treasury Money Market Fund (VUSXX) is an alternative money market fund which you must manually purchase, but the interest will be mostly (80% for 2023 tax year) exempt from state and local income taxes because it comes from qualifying US government obligations. Current SEC yield of 4.63% (compound yield of 4.73%).

Treasury Bills and Ultra-short Treasury ETFs
Another option is to buy individual Treasury bills which come in a variety of maturities from 4-weeks to 52-weeks and are fully backed by the US government. You can also invest in ETFs that hold a rotating basket of short-term Treasury Bills for you, while charging a small management fee for doing so. T-bill interest is exempt from state and local income taxes, which can make a significant difference in your effective yield.

  • You can build your own T-Bill ladder at TreasuryDirect.gov or via a brokerage account with a bond desk like Vanguard and Fidelity. Here are the current Treasury Bill rates. As of 11/12/24, a new 4-week T-Bill had the equivalent of 4.60% annualized interest and a 52-week T-Bill had the equivalent of 4.38% annualized interest.
  • The iShares 0-3 Month Treasury Bond ETF (SGOV) has a 4.88% SEC yield and effective duration of 0.10 years. SPDR Bloomberg Barclays 1-3 Month T-Bill ETF (BIL) has a 4.57% SEC yield and effective duration of 0.08 years.

US Savings Bonds
Series I Savings Bonds offer rates that are linked to inflation and backed by the US government. You must hold them for at least a year. If you redeem them within 5 years there is a penalty of the last 3 months of interest. The annual purchase limit for electronic I bonds is $10,000 per Social Security Number, available online at TreasuryDirect.gov.

  • “I Bonds” bought between November 2024 and April 2025 will earn a 3.11% rate for the first six months. The rate of the subsequent 6-month period will be based on inflation again. More on Savings Bonds here.
  • In mid-April 2025, the CPI will be announced and you will have a short period where you will have a very close estimate of the rate for the next 12 months. I will have another post up at that time.

Rewards checking accounts
These unique checking accounts pay above-average interest rates, but with unique risks. You have to jump through certain hoops which usually involve 10+ debit card purchases each cycle, a certain number of ACH/direct deposits, and/or a certain number of logins per month. If you make a mistake (or they judge that you did) you risk earning zero interest for that month. Some folks don’t mind the extra work and attention required, while others would rather not bother. Rates can also drop suddenly, leaving a “bait-and-switch” feeling.

  • OnPath Federal Credit Union (my review) pays 7.00% APY on up to $10,000 if you make 15 debit card purchases, opt into online statements, and login to online or mobile banking once per statement cycle. Anyone can join this credit union via $5 membership fee to join partner organization. You can also get a $100 Visa Reward card when you open a new account and make qualifying transactions.
  • Genisys Credit Union pays 6.75% APY on up to $7,500 if you make 10 debit card purchases of $5+ each per statement cycle, and opt into online statements. Anyone can join this credit union via $5 membership fee to join partner organization.
  • La Capitol Federal Credit Union pays 6.25% APY on up to $10,000 if you make 15 debit card purchases of at least $5 each per statement cycle. Anyone can join this credit union via partner organization, Louisiana Association for Personal Financial Achievement ($20).
  • Credit Union of New Jersey pays 6.00% APY on up to $25,000 if you make 12 debit card purchases, opt into online statements, and make at least 1 direct deposit, online bill payment, or automatic payment (ACH) per statement cycle. Anyone can join this credit union via $5 membership fee to join partner organization.
  • Andrews Federal Credit Union pays 6.00% APY on up to $25,000 if you make 15 debit card purchases, opt into online statements, and make at least 1 direct deposit or ACH transaction per statement cycle. Anyone can join this credit union via partner organization.
  • Orion Federal Credit Union pays 6.00% APY on up to $10,000 if you make electronic deposits of $500+ each month (ACH transfers count) and spend $500+ on your Orion debit or credit card each month. Anyone can join this credit union via $10 membership fee to partner organization membership.
  • All America/Redneck Bank pays 4.65% APY on up to $15,000 if you make 10 debit card purchases each monthly cycle with online statements.
  • Find a locally-restricted rewards checking account at DepositAccounts.

Certificates of deposit (greater than 1 year)
CDs offer higher rates, but come with an early withdrawal penalty. By finding a bank CD with a reasonable early withdrawal penalty, you can enjoy higher rates but maintain access in a true emergency. Alternatively, consider building a CD ladder of different maturity lengths (ex. 1/2/3/4/5-years) such that you have access to part of the ladder each year, but your blended interest rate is higher than a savings account. When one CD matures, use that money to buy another 5-year CD to keep the ladder going. Some CDs also offer “add-ons” where you can deposit more funds if rates drop.

  • Synchrony Bank has a 5-year certificate at 4.00% APY (no minimum), 4-year at 3.90% APY, 3-year at 3.90% APY, 2-year at 3.90% APY, and 1-year at 4.20% APY. Early withdrawal penalty for the 4-year and 5-year is 365 days of interest.
  • BMO Alto has a 5-year CD at 4.00% APY. 4-year at 3.90% APY. 3-year at 3.90% APY. 2-year at 3.90% APY. 1-year at 4.30% APY. No minimum. The early withdrawal penalty (EWP) for CD maturities of 1 year or more is 180 days of interest. For CD maturities of 11 months or less, the EWP is 90 days of interest. However, note that they reserve the right to prohibit early withdrawals entirely (!). Online-only subsidiary of BMO Bank.
  • You can buy certificates of deposit via the bond desks of Vanguard and Fidelity. You may need an account to see the rates. These “brokered CDs” offer FDIC insurance and easy laddering, but they don’t come with predictable early withdrawal penalties. Right now, I see a 5-year non-callable CD at 3.85% APY (callable: no, call protection: yes). Be warned that both Vanguard and Fidelity will list higher rates from callable CDs, which importantly means they can call back your CD if rates drop later. (Issuers have indeed started calling some of their old 5%+ CDs as of Fall 2024.)

Longer-term Instruments
I’d use these with caution due to increased interest rate risk (tbh, I don’t use them at all), but I still track them to see the rest of the current yield curve.

  • Willing to lock up your money for 10 years? You can buy long-term certificates of deposit via the bond desks of Vanguard and Fidelity. These “brokered CDs” offer FDIC insurance, but they don’t come with predictable early withdrawal penalties. You might find something that pays more than your other brokerage cash and Treasury options. Right now, I see a 10-year CDs at [n/a] (non-callable) vs. 4.43% for a 10-year Treasury. Watch out for higher rates from callable CDs where they can call your CD back if interest rates drop.

All rates were checked as of 11/12/2024.

Photo by Giorgio Trovato on Unsplash

Filed Under: Banking, Deals & Offers, Investing // Tagged:

Savings I Bonds November 2024: 1.20% Fixed Rate, 1.91% Inflation Rate (3.11% Total for First 6 Months)

Posted on October 31, 2024 // 1 Comment

Update: Savings I Bonds bought from November 1, 2024 through April 30, 2025 will have a fixed rate of 1.20%, for a total rate of 3.11% for the first 6 months. As a quick and dirty comparison, the nominal yield on 5-year Treasury bonds is currently 4.15% and the real yield on 5-year TIPS is currently 1.77%.

Every existing I Bond will earn this inflation rate of ~1.91% eventually for 6 months; you will need to add your own fixed rate that was set based the initial purchase month. See you again in mid-April for the next early prediction for May 2025.

Original post:

Savings I Bonds are a unique, low-risk investment backed by the US Treasury that pay out a variable interest rate linked to inflation. With a holding period from 12 months to 30 years, you could own them as an alternative to bank certificates of deposit (they are liquid after 12 months) or bonds in your portfolio.

New inflation numbers were just announced at BLS.gov, which allows us to make an early prediction of the November 2024 savings bond rates a couple of weeks before the official announcement on the 1st. This also allows the opportunity to know exactly what an October 2024 savings bond purchase will yield over the next 12 months, instead of just 6 months. You can then compare this against a November 2024 purchase.

New inflation rate prediction. March 2024 CPI-U was 312.332. September 2024 CPI-U was 315.301, for a semi-annual inflation rate of 0.95%. Using the official composite rate formula:

Composite rate formula: [Fixed rate + (2 x semiannual inflation rate) + (fixed rate x semiannual inflation rate)]

This results in the variable component of interest rate for the next 6 month cycle being ~1.90% to 1.91%, depending on the fixed rate.

Tips on purchase and redemption. You can’t redeem until after 12 months of ownership, and any redemptions within 5 years incur an interest penalty of the last 3 months of interest. A simple “trick” with I-Bonds is that if you buy at the end of the month, you’ll still get all the interest for the entire month – same as if you bought it in the beginning of the month. It’s best to give yourself a few business days of buffer time. If you miss the cutoff, your effective purchase date will be bumped into the next month. (You should always sell at the very beginning of the month.)

Buying in October 2024. If you buy before the end of October, the fixed rate portion of I-Bonds will be 1.30%. You will be guaranteed a total interest rate of 1.30 + 2.98 = 4.28% for the next 6 months. For the 6 months after that, the total rate will be 1.30 + 1.91 = 3.21%.

Buying in November 2024. If you buy in November 2024, you will get ~1.91% plus a newly-set fixed rate for the first 6 months. The new fixed rate is officially unknown, but is loosely linked to the real yield of short-term TIPS with some reductions. My rough guess is somewhere between 0.9% and 1.2%. The current real yield on short-term TIPS is lower than it was during the last reset, when the fixed rate was set at 1.3%. Every six months after your purchase, your rate will adjust to your fixed rate (set at purchase) plus a variable rate based on inflation.

If you have an existing I-Bond, the rates reset every 6 months depending on your specific purchase month. Everyone will eventually get this variable rate. Your bond rate = your specific fixed rate (based on purchase month, look it up here) + variable rate (total bond rate has a minimum floor of 0%).

Buy now or wait? Between those two options, I would buy in October as you’ll likely get a higher fixed rate and a decent initial 6-month rate. However, I actually don’t plan to buy any savings bonds this year. The yields are simply not very interesting as compared to other options. Short-term, it’s better to go T-Bills with the state tax exemption. For my inflation-protected needs, I have been buying longer-term TIPS instead to lock in the higher current 2%+ real yields (in tax-deferred).

Unique features and considerations. I have a separate post on reasons to own Series I Savings Bonds, including inflation protection, tax deferral, exemption from state income taxes, and potential tax benefits if used toward qualified educational expenses.

The main drawback is hassle. You can only buy new savings bonds through TreasuryDirect.gov, which is limited in its customer service resources and features. Conducting certain transactions may require a medallion signature guarantee which requires a visit to a physical bank or credit union and snail mail. If your password is compromised, they will not replace any lost or stolen savings bonds. The juice may not be worth the squeeze when you can own individual Treasury bonds or TIPS within any full-service brokerage account. (Finding a bank that will redeem a physical paper savings bond at all can be difficult these days.)

Over the years, I have accumulated I-Bonds and consider it part of the inflation-linked bond allocation inside my long-term investment portfolio. However, after converting all my paper bonds to electronic versions earlier this year, I have been selling the lower fixed rate bonds and reinvesting in 2%+ real yield TIPS.

Annual purchase limits. The annual purchase limit is now $10,000 in online I-bonds per Social Security Number. For a couple, that’s $20,000 per year. As of 2024. you can only buy online at TreasuryDirect.gov, after making sure you’re okay with their security protocols and user-friendliness. (No more tax refund savings bonds.) Technically, the purchase limits are per Social Security Number or Employer Identification Number. For those looking for another way to expand their purchasing power, that means you can also buy for a child, grandchild, LLC, or a trust.

Bottom line. Savings I bonds are a unique, low-risk investment that are linked to inflation and only available to individual investors. You can now only purchase them online at TreasuryDirect.gov. For more background, see the rest of my posts on savings bonds.

[Image: 1942 US Savings Bond poster – source]

Filed Under: Banking, Investing, Retirement, Savings Bonds //

Best Interest Rates on Cash Roundup – October 2024

Posted on October 15, 2024 // 9 Comments

Here’s my monthly roundup of the best interest rates on cash as of October 2024, roughly sorted from shortest to longest maturities. There are lesser-known opportunities available to individual investors, often earning more money while keeping the same level of safety by moving to another FDIC-insured bank or NCUA-insured credit union. Check out my Ultimate Rate-Chaser Calculator to see how much extra interest you could earn from switching. Rates listed are available to everyone nationwide. Rates checked as of 10/15/2024.

TL;DR: Rates are still dropping at all maturities, from savings accounts outward. Still some 5%+ savings accounts. Still some 4%+ APY 5-year CDs. Compare against Treasury bills and bonds at every maturity, taking into account state tax exemption. I no longer recommend fintech companies due to the possibility of loss due to poor recordkeeping and/or fraud.

High-yield savings accounts
Since the huge megabanks still pay essentially no interest, everyone should at least have a separate, no-fee online savings account to piggy-back onto your existing checking account. The interest rates on savings accounts can drop at any time, so I list the top rates as well as competitive rates from banks with a history of competitive rates and solid user experience. Some banks will bait you with a temporary top rate and then lower the rates in the hopes that you are too lazy to leave.

  • The top rates at the moment are from newcomers Pibank at 5.50% APY and TIMBR at 5.25% APY. I have no personal experience with either, but they are the top rates at the moment. Most others have dropped at least a little. For example, CIT Platinum Savings is now at 4.70% APY with $5,000+ balance.
  • SoFi Bank is at 4.30% APY + up to $325 new account bonus with direct deposit. You must maintain a direct deposit of any amount (even $1) each month for the higher APY. SoFi has historically competitive rates and full banking features. See details at $25 + $300 SoFi Money new account and deposit bonus.
  • Here is a limited survey of high-yield savings accounts. They aren’t the top rates, but a group that have historically kept it relatively competitive such that I like to track their history.

Short-term guaranteed rates (1 year and under)
A common question is what to do with a big pile of cash that you’re waiting to deploy shortly (plan to buy a house soon, just sold your house, just sold your business, legal settlement, inheritance). My usual advice is to keep things simple and take your time. If not a savings account, then put it in a flexible short-term CD under the FDIC limits until you have a plan.

  • No Penalty CDs offer a fixed interest rate that can never go down, but you can still take out your money (once) without any fees if you want to use it elsewhere. Marcus has a 7-month No Penalty CD at 4.20% APY with a $500 minimum deposit. Farmer’s Insurance FCU has 9-month No Penalty CD at 4.50% APY with a $1,000 minimum deposit. Consider opening multiple CDs in smaller increments for more flexibility.
  • Langley Federal Credit Union has a 10-month certificate special at 5.25% APY ($500 min, $50,000 max). This is a promo for new members only. Anyone can join this credit union nationwide; you must maintain $5 in their share savings account. Early withdrawal penalty is 90 days of interest.

Money market mutual funds
Many brokerage firms that pay out very little interest on their default cash sweep funds (and keep the difference for themselves). Note: Money market mutual funds are highly-regulated, but ultimately not FDIC-insured, so I would still stick with highly reputable firms.

  • Vanguard Federal Money Market Fund (VMFXX) is the default sweep option for Vanguard brokerage accounts, which has an SEC yield of 4.80% (changes daily, but also works out to a compound yield of 4.91%, which is better for comparing against APY). Odds are this is much higher than your own broker’s default cash sweep interest rate.
  • Vanguard Treasury Money Market Fund (VUSXX) is an alternative money market fund which you must manually purchase, but the interest will be mostly (80% for 2023 tax year) exempt from state and local income taxes because it comes from qualifying US government obligations. Current SEC yield of 4.86% (compound yield of 4.97%).

Treasury Bills and Ultra-short Treasury ETFs
Another option is to buy individual Treasury bills which come in a variety of maturities from 4-weeks to 52-weeks and are fully backed by the US government. You can also invest in ETFs that hold a rotating basket of short-term Treasury Bills for you, while charging a small management fee for doing so. T-bill interest is exempt from state and local income taxes, which can make a significant difference in your effective yield.

  • You can build your own T-Bill ladder at TreasuryDirect.gov or via a brokerage account with a bond desk like Vanguard and Fidelity. Here are the current Treasury Bill rates. As of 10/15/24, a new 4-week T-Bill had the equivalent of 4.80% annualized interest and a 52-week T-Bill had the equivalent of 4.19% annualized interest.
  • The iShares 0-3 Month Treasury Bond ETF (SGOV) has a 5.08% SEC yield and effective duration of 0.10 years. SPDR Bloomberg Barclays 1-3 Month T-Bill ETF (BIL) has a 4.85% SEC yield and effective duration of 0.08 years.

US Savings Bonds
Series I Savings Bonds offer rates that are linked to inflation and backed by the US government. You must hold them for at least a year. If you redeem them within 5 years there is a penalty of the last 3 months of interest. The annual purchase limit for electronic I bonds is $10,000 per Social Security Number, available online at TreasuryDirect.gov.

  • “I Bonds” bought between May 2024 and October 2024 will earn a 4.28% rate for the first six months. The rate of the subsequent 6-month period will be based on inflation again. More on Savings Bonds here.
  • In mid-October 2024, the CPI will be announced and you will have a short period where you will have a very close estimate of the rate for the next 12 months. This is the mid-October post. I will have another post up at that time.

Rewards checking accounts
These unique checking accounts pay above-average interest rates, but with unique risks. You have to jump through certain hoops which usually involve 10+ debit card purchases each cycle, a certain number of ACH/direct deposits, and/or a certain number of logins per month. If you make a mistake (or they judge that you did) you risk earning zero interest for that month. Some folks don’t mind the extra work and attention required, while others would rather not bother. Rates can also drop suddenly, leaving a “bait-and-switch” feeling.

  • OnPath Federal Credit Union (my review) pays 7.00% APY on up to $10,000 if you make 15 debit card purchases, opt into online statements, and login to online or mobile banking once per statement cycle. Anyone can join this credit union via $5 membership fee to join partner organization. You can also get a $100 Visa Reward card when you open a new account and make qualifying transactions.
  • Genisys Credit Union pays 6.75% APY on up to $7,500 if you make 10 debit card purchases of $5+ each per statement cycle, and opt into online statements. Anyone can join this credit union via $5 membership fee to join partner organization.
  • Credit Union of New Jersey pays 6.00% APY on up to $25,000 if you make 12 debit card purchases, opt into online statements, and make at least 1 direct deposit, online bill payment, or automatic payment (ACH) per statement cycle. Anyone can join this credit union via $5 membership fee to join partner organization.
  • Andrews Federal Credit Union pays 6.00% APY on up to $25,000 if you make 15 debit card purchases, opt into online statements, and make at least 1 direct deposit or ACH transaction per statement cycle. Anyone can join this credit union via partner organization.
  • Pelican State Credit Union pays 6.05% APY on up to $20,000 if you make 15 debit card purchases, opt into online statements, log into your account at least once, and make at least 1 direct deposit, online bill payment, or automatic payment (ACH) per statement cycle. Anyone can join this credit union via partner organization membership.
  • Orion Federal Credit Union pays 6.00% APY on up to $10,000 if you make electronic deposits of $500+ each month (ACH transfers count) and spend $500+ on your Orion debit or credit card each month. Anyone can join this credit union via $10 membership fee to partner organization membership.
  • All America/Redneck Bank pays 4.65% APY on up to $15,000 if you make 10 debit card purchases each monthly cycle with online statements.
  • Find a locally-restricted rewards checking account at DepositAccounts.

Certificates of deposit (greater than 1 year)
CDs offer higher rates, but come with an early withdrawal penalty. By finding a bank CD with a reasonable early withdrawal penalty, you can enjoy higher rates but maintain access in a true emergency. Alternatively, consider building a CD ladder of different maturity lengths (ex. 1/2/3/4/5-years) such that you have access to part of the ladder each year, but your blended interest rate is higher than a savings account. When one CD matures, use that money to buy another 5-year CD to keep the ladder going. Some CDs also offer “add-ons” where you can deposit more funds if rates drop.

  • Synchrony Bank has a 5-year certificate at 4.00% APY (no minimum), 4-year at 4.00% APY, 3-year at 4.00% APY, 2-year at 3.90% APY, and 1-year at 4.40% APY. Early withdrawal penalty for the 4-year and 5-year is 365 days of interest.
  • Advancial Federal Credit Union has has a 5-year certificate at 4.09% APY (higher $50,000 min). Early withdrawal penalty for the 5-year is 365 days of interest. Anyone nationwide should be able to join via membership with partner organization US Dog Agility Association, but I would call or check first.
  • State Department FCU has a 60-month CD at at 3.91% APY ($500 min) or 4.11% APY (jumbo $100,000 min). Early withdrawal penalty for the 5-year is 360 days of interest. Membership is open nationwide by agreeing to join the American Consumer Council (ACC) membership. Try promo code “consumer” when signing up at ACC for a free membership.
  • You can buy certificates of deposit via the bond desks of Vanguard and Fidelity. You may need an account to see the rates. These “brokered CDs” offer FDIC insurance and easy laddering, but they don’t come with predictable early withdrawal penalties. Right now, I see a 5-year non-callable CD at 3.75 to 3.80% APY (callable: no, call protection: yes). Be warned that both Vanguard and Fidelity will list higher rates from callable CDs, which importantly means they can call back your CD if rates drop later. (Issuers have indeed started calling some of their old 5%+ CDs as of Fall 2024.)

Longer-term Instruments
I’d use these with caution due to increased interest rate risk (tbh, I don’t use them at all), but I still track them to see the rest of the current yield curve.

  • Willing to lock up your money for 10 years? You can buy long-term certificates of deposit via the bond desks of Vanguard and Fidelity. These “brokered CDs” offer FDIC insurance, but they don’t come with predictable early withdrawal penalties. You might find something that pays more than your other brokerage cash and Treasury options. Right now, I see a 10-year CDs at 3.75% (non-callable) vs. 4.03% for a 10-year Treasury. Watch out for higher rates from callable CDs where they can call your CD back if interest rates drop.

All rates were checked as of 10/15/2024.

Photo by Giorgio Trovato on Unsplash

Filed Under: Banking, Deals & Offers, Investing // Tagged:

Bank of America Credit Cards – 2% More Rewards Day on Thursday 11/7/2024

Posted on October 11, 2024 // 18 Comments

Update for 2024, promo is back again with limit of $50 extra per card. Bank of America has a one-day credit card promotion called “More Rewards Day” on Thursday, 11/7/24. Depending on your BofA credit card type (all consumer and business cards are all eligible), you can earn an additional 2% cash back or 2 points or miles/$1 spent on purchases made on 11/7/24 only (Eastern time zone!), up to a $50/5,000 point cap per unique credit card account. That’s on on top of the rewards you’re already earning. No enrollment required. Specifically:

  • Cash Back Credit Cards. Earn an additional 2% cash back for every $1 spent on purchases made on 11/7/24. This one-day offer is good for the first $2,500 in purchases up to $50 cash back. That’s on top of the rewards you’re already earning.
  • Points Rewards Credit Cards. Earn an additional 2 points for every $1 spent on purchases made on 11/7/24. This one-day offer is good for the first $2,500 in purchases up to 5,000 points. That’s on top of the rewards you’re already earning.
  • Miles Rewards Credit Cards. Earn an additional 2 Miles for every $1 spent on purchases made on 11/7/24 ET. This one-day offer is good for the first $2,500 in purchases up to 5,000 Miles. That’s on top of the rewards you’re already earning.
  • Non-Rewards and All Other Rewards Credit Cards. Earn 2% cash back in the form of a statement credit on purchases made on 11/7/24. This one-day offer is good for the first $2,500 in purchases up to $50 cash back.

You can get the bonus on each of your unique credit cards. Note that it expires 11:59pm in the Eastern time zone. It appears that somehow they can track the “transaction date” separately from when it posts to your statement. Note that some retail websites don’t actually charge you until a physical item ships.

Only Purchases that post to your account and appear on your statement with a transaction date of 11/07/2024 will qualify. Merchants may impact when a transaction will appear on your statement, particularly if they delay processing of the purchase. Transactions with delayed processing of 90 days or more will not be eligible to be included in the promotional offer.

This is an interesting promotion that could work out well if (1) you have a BofA rewards card (or multiples) with good rewards already, (2) you have the Preferred Rewards boost, (3) you have larger purchases planned in one of your customized bonus categories, or just any larger purchase really, and (4) it is the type of purchase that applies the same day (sometimes you don’t get charged until something ships). Max out that $2,500 in purchases for each card. Some possibilities:

  • Pay estimated income taxes at PayUSATax.com for only 1.82% fee.
  • Pay your insurance premiums upfront. My State Farm grouped monthly bill can also be timed using manual payment.
  • Pay your utilities, property taxes, phone bills, and other monthly bills upfront. Sometimes it just costs a one-time flat fee to pay by credit card, which can be worth if you are charging $1,000+.
  • Make your annual charitable contributions on 11/7/23 this year.
  • Gas and EV charging stations; online shopping, including cable, internet, phone plans and streaming; dining; travel; drug stores and pharmacies; or home improvement and furnishings are choices for your 3% category for the BofA Customized Cash card (up to 5.25% with Preferred Rewards) for a total of 7.25% cash back total with this promo. You can change your category this month in app and then max out the $2,500 quarterly limit using gift cards at Amazon (online shopping), Home Depot (home improvement), gas stations, and so on.
Filed Under: Banking, Deals & Offers //

Robinhood HOOD Week Promo: 3% IRA, 2% Margin, 1% ACAT Bonus (10/16-10/27)

Posted on October 10, 2024 // 20 Comments

Robinhood brokerage app is jumping on the week-long promo trend and just teased Robinhood HOOD Week (“HOOD” is their stock symbol) from October 16, 2024 to October 27, 2024. The front page is vague but inside the full terms you can see exactly what they will be offering. They are still aggressively collecting assets, and are rolling back out some very competitive cash bonuses when you transfer in assets from external brokerages:

  • 1% bonus on ACATS transfers to your Robinhood joint or individual investing account from an external brokerage. Two-year minimum hold period.
  • 2% bonus on ACATS transfers with a margin balance of $10,000 or more to your Robinhood joint or individual investing account from an external brokerage. Two-year minimum hold period.
  • 3% on ACATS transfers to your Robinhood IRA with a Robinhood Gold subscription, excluding rollovers. Five-year minimum hold period.

Hodl on, though! Transfers must be initiated between 12 AM ET on October 16, 2024 and 11:59 PM ET on October 27, 2024.

Robinhood will also reimburse up to $75 in outgoing transfer fees with transfers of $7,500 or more. This is a one-time reimbursement per account type, per external brokerage.

The asset retention requirement requires that you maintain the transferred assets in your Robinhood account for at least 2 years for the 1% or 2% bonuses and 5 years for the 3% bonus. If you withdraw assets and the balance falls below the initial transfer amount, Robinhood reserves the right to reduce or revoke your bonus, in full or in part.

The 2% bonus with margin balances is an interesting new wrinkle, and it could very easily be worth it “create” a margin balance ahead of time in preparation for the promo week. You’d want to withdraw your cash, and then buy something on margin – even SGOV or another Treasury Bill ETF would work. Paying even 12% interest on $10,000 of margin for an entire month would only be $100 of interest. An extra 1% on $100,000 transferred is worth $1,000, an extra 1% of $1 million is $10,000, and so on.

I didn’t even know you were allowed to transfer margin balances, but apparently that is one of the features of the ACATS system. I suppose it’s like a balance transfer between credit cards, and Robinhood really wants your interest-accruing debt.

I’ve already written multiple articles about past flavors of these Robinhood promos, and I participated in the 3% IRA bonus previously. As always, read through the terms and understand that you’ll be locked into Robinhood for two to five years. Since I’m already partially locked-in, I am pondering that new 2% margin transfer bonus. 🤔

(Anyone understand the meaning of the cherry?)

Filed Under: Banking, Deals & Offers, Investing //
« Previous Page
Next Page »