My wife has had a savings account with PNC Bank for over 5 years. She currently receives 2/10 of 1% on her money. So if she had $100,000 in her account, she would be paid $200 a year.
She also has an American Express credit card and on her last statement she noticed they were paying 2.75% interest on savings accounts. She asked me to look into it to see if they were FDIC insured. I checked and found they were. So, on a $100,000 account, she would receive $2,750 per year at the current rate.
I have an Ameritrade brokerage account (they were bought out by Charles Schwab) and I called them to ask them to buy 1 year treasuries. During the conversation, I found out that they also sell Bank CDs. They directed me to the Bank CDs section of my account and I found that Key Bank (Ohio) had a 1 year CD at 4.858%. So, on a $100,000 account, she would receive $4,858 per year at that locked-in rate. The minimum purchase is $1,000 per CD. Interest is paid in February and August. WOW!
You can bet that this week my wife will transfer most of the money from her savings account at PNC Bank to her Ameritrade account, to take advantage of this great rate.
Ameritrade also quotes a Silvergate Bank 6 month CD with a rate of 4.4%.
If your broker does not offer bank CDs, you can open an Ameritrade account on their website, www.tdameritrade.com. There you can open an account, no money required, and get an account number. Once your account is created, you will be able to transfer money from your bank account to your Ameritrade brokerage account. Another great feature of your Ameritrade account is that there are no commissions charged for buying and selling stocks.
One strategy would be to put half of your money in a 1 year CD and the other half in a 6 month CD as we expect rates to continue to rise…maybe up to 7% or more . And, if they do, you want to be able to continue to lock in those higher rates.
After 6 months, you would then redeem your 6 month CD and use that money to buy a 1 year CD at that high rate, and in another 6 months your 1 year CD would mature, and you would then buy another 6 month CD…etc. etc., and possibly lock in a very high rate with a 5-year CD.
The extra income you can now receive due to high interest rates is one of the few ways you now have to offset runaway inflation, as it gives you more personal income to spend, thus more power to spend. ‘purchase.
Joe Cotton has won three national stock picking contests with annual percentage gains over 96%. Its winner of the 2020 Wall Street Best Stocks competition was Inovio Pharmaceuticals (Symbol INO) with a 742% 1-year return.
This article is not investment advice and should not be construed as investment advice. For investment advice, consult a Registered Investment Advisor or Certified Financial Planner. Joe Cotton’s website is www.cottonstocks.net. Joseph W. Cotton of NKY is the publisher of the market newsletter, Cotton’s Technically Speaking. He is a graduate of Xavier University, a former bank manager and credit analyst, and a former registered investment representative of Fidelity Investments. Contact him at [email protected]