Life and Money With Helaine by Helaine Olen

CD or Savings Under Specific Circumstances

Hi, Helaine: I have a question. I put $15,000 in a CD last August for a year. The interest rate is 2.2 percent. I got a postcard in the mail from a bank the other day. It’s offering $600 to open a new savings account with a $15,000 minimum, along with one monthly direct deposit to the checking account. I am thinking of pulling my money out of the CD and doing this. I called the bank where I have the CD and will only lose $25 for withdrawing early. Do you think this is a smart move? -- Depositing for Dollars

Dear Depositing for Dollars: On the face of it, there is no reason not to do this, as long as you can arrange for a monthly automatic deposit. When I crunched the numbers, I determined you will come out ahead by more than $200. But I do need to ask a question: What’s your self-discipline like? Some people use CDs not only as a way to earn a bit of extra interest on their emergency cash stash, but as a way of discouraging them from raiding it. All too often, the penalty you pay and interest gains you forgo for taking the money out early, even if it is as little as $25, acts as a deterrent. If this is true for you, leave the money alone. If, on the other hand, you are disciplined enough to leave the money alone, you could do this.

One other thing: I’m guessing this means you plan to close your previous checking account and use this one going forward. (Few people want two separate checking accounts.) Is the hassle involved -- changing automatic payments and the like -- worth it to you in exchange for a few hundred dollars? I can’t answer that for you. Only you can.

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