Updated 1/23/17. It appears that Andrews FCU has quietly added back this 7-year 3% APY CD on their share certificate rates page. I don’t know how long this will last. Thanks to FI35 for the tip. Please see my Andrews Federal Credit Union Application and Account Opening Review for more details on the opening process. As I have an active account with Andrews FCU, I verified it as an option today (1/23/17) to open directly online. (Click to enlarge.)

Original post:

Let’s take a closer look at this 84-month Share Certificate at 3.01% APY. The early withdrawal penalty is a rather modest 180-days of interest. The minimum opening deposit is $1,000. No maximum balance cap. I created a spreadsheet to calculate the effective interest rate if you withdraw early, and here are the results visually:

If you withdraw after one year, you’ve still earned 1.50% APY after paying the penalty. After 2 years, you’ll have earned 2.25% APY. After 3 years, you’ll have earned 2.51% APY. At all these intervals, you are ahead of nearly all the top rates from other banks and credit unions.

If you don’t qualify directly, anyone can join the credit union by first joining the American Consumer Council for $8. Try the promo code consumer and you should be able to save that five bucks. After that, join AFCU online, and deposit the minimum $5 to open a share account. After your share account is open, you can try to open the promotional CDs online. Alternatively, you may need to call them up directly and expedite things.

Please see my Andrews Federal Credit Union Application and Account Opening Review for more details.

I am striking out the refer-a-friend bonus text below because I no longer see it advertised on their site. This way I can keep the details in case they bring it back.

$50 Refer a Friend Bonus. As part of the holiday promotion, new members can also get a $50 cash bonus if referred by an existing member. The referrer also gets $50. However, the referred person must open a checking account and set up direct deposit of $500 or more. Here are the exact terms:

I am not exactly sure how this works in practical terms. I believe that during the application process there is a question “Where Did You Hear About Us?” and you can pick “Family/Friend Referral” and you can leave your friend’s name and Andrews FCU membership number in the comments field. If you are looking to open up a checking account and set up direct deposit, I am a member now so if you want a referral please contact me.

Wells Fargo has a $250 bonus offer for new checking account customers. You can open any consumer checking account except for Teen Checking. The prepaid Wells Fargo EasyPay® Card is not eligible. You must open the account from the special bonus page with a minimum opening deposit of $25 by February 17, 2017. (You can charge the opening deposit on a credit card.) Within 60 days of account opening, you must also do one of the following:

• Make 10 debit card purchases/payments.
• Set up a qualifying Direct Deposit of $500 to your new checking account.

Note that doing any one of these activities every month also waives the $10 monthly service fee on the Wells Fargo Everyday Checking account. Other ways to waive the monthly service fee are to maintain a $1,500 minimum daily balance or link the account to a Wells Fargo Campus ATM or Campus Debit Card.

In addition, to get the bonus you cannot be:

• A current owner on a Wells Fargo consumer checking account
• A Wells Fargo team member
• A recipient of a consumer checking bonus in the past 12 months (limit 1 bonus per customer)

Thanks to Lee and Adam for the tip. The annoying part? The page is contradictory in regards to who is actually eligible. Right above the “Important things to know about the $250 offer:” it says:

This is an exclusive, nontransferable offer.

But then right below that it says:

Offer available in all Wells Fargo branches or online at wellsfargo.com/250offer.

If I had to bet, I would say that Wells Fargo will give the bonus to anyone who applies through this special link and they approve your application. However, I can’t guarantee it so proceed at your own risk. This is a pretty nice offer if you were looking for a checking account at a “Mega Bank”.

Our family keeps a year’s worth of expenses (not income) put aside in cash reserves; it provides financial insurance with the side benefits of lower stress and less concern about stock market gyrations. Emergency funds can have a better return on investment than what you see on your bank statement. In my experience, having a solid cash cushion is the first step towards financial independence.

I don’t chase rates nearly as much as I used to, but it still pays to shop around. Chase Bank on a 1-year CD? 0.02% APY. Bank of America on a 10-year CD? 0.15% APY. Who buys these things?!? Meanwhile, the rates below vary from 1% up to over 3% annualized.

As of 11/6/2016, below is a roundup of the best rates backed by the full faith and credit of the US government (FDIC-insured, NCUA-insured, US Treasury Bonds, US Savings Bonds). I will try to sort them from the shortest to longest maturities.

High-yield savings accounts

• Online savings accounts, everyone’s got one these days. Currently, the ones with a history of competitive rates are around 1% APY. These savings accounts can change their interest rate at any time, so if you’re going to just pick the highest one, be ready to move your money. I prefer the ones with a history of competitive rates, and I’ve been with Ally Bank for over 5 years. Their online savings is currently at 1% APY.

Short-term guaranteed rates (under 1 year)

• If you’ve got a big wad of cash that you’re waiting to deploy shortly (just sold your house, just sold your business, inheritance), I say just keep it safe until you’re ready to invest it properly. Palladian Private Bank has a 6-month promotional rate of 1.30% APY guaranteed (maximum initial deposit of $100k) for new accounts. After the first 6 months, the rate reverts back to their normal rate (currently 1.10% APY). Since the initial promo rate is fixed, this makes it the higher 6-month CD rate available.

Flexible Savings Bonds

• Series I Savings Bonds offer rates that are linked to inflation. “I Bonds” bought right now will earn a 2.76% rate for the first six months, and then a variable rate based on ongoing inflation after that. You must hold them for a year, and if you redeem them within 5 years there is a penalty of the last 3 months of interest. While future rates are unknown, at the very minimum it will be competitive with the best 1-year CD rates. More info here.

Prepaid Cards with Attached Savings Accounts

• A small subset of prepaid debit cards have an “attached” FDIC-insured savings account with high interest rates. The risks are that balances are capped, and there are many fees that you must be careful to avoid (lest they eat up your interest). The other catch is that these good features may be killed off without much notice. I pulled my money out of my NetSpend card after the eligible balance dropped to $1,000 (no longer worth the effort for extra $3 a month in interest).
• Insight Card is one of the best remaining cards with 5% APY on up to $5,000 as of this writing. Fees to avoid include the $1 per purchase fee, $2.50 for each ATM withdrawal, and the $3.95 inactivity fee if there is no activity within 90 days. If you can navigate it carefully (basically only use ACH transfers and keep up your activity regularly) you can still end up with more interest than other options.

Rewards checking accounts

• These unique checking accounts pay above-average interest rates, but with some risk. You have to jump through certain hoops, and if you make a mistake you won’t earn any interest for that month. Rates can also drop quickly, leaving a “bait-and-switch” feeling. But the rates can be high while they last.
• Consumers Credit Union offers up to 4.59% APY on up to a $20k balance, although 3.09% APY on a $10k balance might be easier to achieve unless you satisfy a long list of requirements. Note that the 4.59% APY requires you to apply and get approved for an additional credit card through them (other credit cards offer $500+ in sign-up bonuses). Keep your 12 debit purchases small as well, as for every $500 in monthly purchases you may be losing out on 2% cashback (or $10 a month on after-tax benefit).

Certificates of deposit

• If you have a large cushion, it’s quite likely to just sit there for years. Why not put some money in longer-term investments where you can still take it out in a true emergency and pay an early withdrawal penalty. For example, UNIFY Financial Credit Union (formerly Western Federal Credit Union) is offering a 5-year Share Certificate paying 2.00% APY ($1,000 minimum balance) with an early withdrawal penalty of only 90 days interest. For example, if you withdraw from this CD after 2 years and pay the penalty, your effective rate earned will still be 1.76%. Anyone can join this credit union via partner organization, it appears it might be free or at most a one-time $25 fee.

Longer-term Instruments

• Willing to lock up your money for 10+ years? Did you know that you can buy certificates of deposit via Vanguard’s bond desk? These “brokered CDs” offer the same FDIC-insurance and are often through commercial banks like Goldman Sachs. As of this writing, you can get a 10-year CD maturing 11/9/2026 that pays 2.10% APY. (Unfortunately, current long-term CD rates do not rise much higher even as you extend beyond a 5-year maturity.) Prices will vary regularly.
• How about two decades!? Series EE Savings Bonds are not indexed to inflation, but they have a guarantee that the value will double in value in 20 years, which equals a guaranteed return of 3.5% a year. However, if you don’t hold for that long, you’ll be stuck with the normal rate which is quite low (currently a sad 0.10% rate). Think of it as a huge early withdrawal penalty. You really, really want to be sure you’ll keep it for 20 years.

All rates were checked as of 11/6/16.

Update April 2016. I originally wrote about this promotion in October 2013, and many readers have been getting $20 of interest every month on a relatively low balance (worked out to 16% APY on $1,500 average balance). With a 1% APY savings account, you’d need $24,000 to get the same amount of interest! Unfortunately, Santander Bank recently announced that this promotion will end and accounts will be converted to a Simply Right checking account later this year (reports include either July 1st or December 1st, 2016).

I would note that this deal lasted for over 2.5 years, longer than I thought it would. Just like with 5% APY Netspend prepaid cards, you can’t really predict how long deals will last. Some end earlier than you think, some end later. Don’t forget to close your account in July, unless you’ve gotten attached to your Santander account (which was always the idea!).

Original post from October 2013 (deal is no longer available):

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