By Arthur Vidro
On Consumerism
This decade’s steep inflationary period led to higher lending rates from banks. Whereas a mortgage with 3% interest was possible a decade ago, today’s rate approaches 7%. A bank loan for a new car is now about 8% (less at credit unions). One local bank requires your paying 14% interest for any personal unsecured loan.
The more interest a bank can charge, the more profit it makes. So, banks have opened their wallets a bit to reward depositors the past few years. The more money you deposit, the more they can lend out at today’s higher interest rates.
Which brings us to Certificates of Deposit (CDs).
Briefly, a CD is money deposited with a financial institution that gains a preset rate of interest for a preset length of time. If you need the money before that time has lapsed, well, you can access most of it, but you’ll sacrifice much of the interest you have earned and often pay a hefty fee as well.
CDs had their heyday in the late 1970s and early 1980s, when inflation was much worse than in the current decade.
In the 1990s, 2000s, and 2010s, I ignored CDs. But three or four years ago the local financial institutions began promoting higher CD rates. Since then, whenever I find myself with a little extra money, I head to a bank for a CD.
The quandary is in knowing which institutions are offering the best deals.
With CDs, the eventual “best” deal of the moment requires your knowing in advance where interest rates will be going.
But there’s no way to know.
In November of 2023, Mascoma Bank offered 5% interest on a nine-month CD ($500 minimum) and an even larger 5.15% on a 12-month CD (but with a whopping $25,000 minimum).
A minimum deposit is often part of CD deals.
In April 2024, One Credit Union had a special on CDs, offering 5% interest for a nine-month deposit. The minimum amount to invest was $1,000. Good deal. If they had offered 5% on a 10-year term, I would have brought them my life savings.
But now I can’t find 5% interest at any local brick-and-mortar institution.
A pitfall of CDs is that they require you to stay on top of your holdings. If you let a CD reach maturity (as well you should) but then take no action, it will roll over into a CD of non-special interest, not much better than a savings account.
In the autumn of 2023, a CD I held at Claremont Savings Bank (it was earning 4%) reached maturity. I went to the bank and spoke in an office to someone whose business card proclaimed her a Management Trainee. I asked her if I took no action, what would happen to the money.
She said it would roll over automatically.
“What are you looking for, for a rate?” she asked.
My response: “I’m not asking for any special favors.”
She looked at her computer screen and answered my money would roll over into a six-month CD that would earn .15% interest.
By the way, “.15%” means just about one-seventh of one percent.
I expressed disappointment, explained the CD had been earning 4%, and so I would take my money in the form of a check and look for a better deal elsewhere.
She told me to wait and (without explanation) ran off and then returned to proudly state: “We can go ahead and renew it for the same thing.”
I chose not to. I didn’t like the idea of their using unpublicized rates to retain customers.
But since then, I’ve opened other CDs at Claremont Savings, partly because they’ve taken to advertising their special rates.
Every now and then I compare the available rates at various banks. It can get bewildering. Here’s the numbers from this month’s look.
Claremont Savings Bank is offering 4.15% interest on three-month CDs; 4% on seven-month CDs; 3.7% on 11-month CDs; and 3.25% on 18-month CDs. By the way, the three-month rate is available only if you deposit “new money,” which means money not already in any of your accounts there.
Many competing banks also have “new money” requirements on some or all of their specials.
Mascoma Bank is offering 4.1% on five-month CDs; 4% on nine-month CDs; and 3.85% on 12-month CDs.
Life is simpler at One Credit Union, which offers but one special: 3.81% for a seven-month CD.
New Hampshire Federal Credit Union has a $500 minimum on all its CDs, which fetch 3.25% on six-month CDs, 3.75% for 12-month and 18-month durations, and 3.5% for two-year, three-year, four-year, and five-year CDs.
That five-year 3.5% rate might be a wonderful deal, or it might be a horrible deal. It all depends on what rates will be during those five years and what they’ll be when you cash it out or roll it over.
For a $5,000 minimum deposit, Bank of New Hampshire pays you 4.25% on five-month CDs, 4% on 10-month CDs, and 3.8% on 18-month CDs — but they require that you first make an appointment. Why? I don’t know. Not for me.
Citizens Bank offers 10-month (3.5%) and 14-month (2.75%) CDs, but the former requires $25,000 of new money, and on top of that both CDs require that you make it an online account. I prefer to bring my money to the bank and watch as a receipt is prepared. I’m not going to deposit money into a bank via computer.
Finally, Bar Harbor & Trust offers 2.75% on five-month CDs ($500 minimum deposit) and an array of rates on six-month, nine-month, and 15-month CDs but those all require that you have a specific type of checking account with them.
Sigh. Life was so much simpler when I was almost dirt-poor in my twenties and living in the basement of my landlord’s house.
