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Online Savings or No Penalty CD

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  • Online Savings or No Penalty CD

    So I am trying to decide if I should move my emergency fund (20K) from my current online savings account at Amex (1.9%) to Marcus by Goldman Sachs 7 month no penalty CD (2.25%)

    Wondering what everyone here thinks.

    With Marcus being a no penalty CD doesn't that basically just make it just as easy to get to the money if I needed to? Anything I am missing here?

  • #2
    I'm going the no-penalty CD route. I don't see a downside... Perhaps they offer the higher rate because inertia & the idea of purchase friction (or in this case, "sale friction") would lead people to keep the money in place better than in a traditional savings account?
    "Praestantia per minutus" ... "Acta non verba"


    • #3
      A few comments:

      1. Your EF doesn't have to all be in one place. You could keep some, like 5K, in the money market for quick access and the rest in a CD for the higher rate.
      2. I believe CDs are all or nothing. You can't withdraw a portion of the money. If you need some, you have to cash it out and take all.
      3. It's expected that the Fed will drop rates again this month so now is a good time to be locking in a higher current rate if you can.
      4. Ally has an 18-month traditional CD for 2.45% (refer back to point #1).

      * Despite the high cost of living, it remains very popular.
      * Why should I pay for my daughter's education when she already knows everything?
      * There are no shortcuts to anywhere worth going.


      • #4
        It's not really enough money to worry over too much honestly.
        I'd probably go with the MM just to have access to it.

        If you were asking this same question about where to park a million dollars there would probably be different advice.


        • #5
          A couple things to consider:
          At the end of the CD term, you'll need to decide what to do with your funds. You may or may not want them to roll over.
          If there's the chance that you may need some, but not all of the funds, then you may want to split the funds in to several CDs (for example, four CDs of $5K each).

          I'm a fan of CDs for the EF. In addition to earning a bit more interest than you would with a regular savings or money market account, the funds are slightly less accessible (still there if you need them, but not as easy to get to as a regular savings account). I'm not saying this applies in your case, but when I was a not-yet-disciplined saver, it was helpful for me to have my rainy day savings "locked away" in CDs.