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Expenses and Savings – Cash March 13, 2007

Posted by pf in Expenses and Savings.
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Currently, I have a fairly signification position in cash, with the overwhelming majority of it placed with GE Interest Plus.  The current rates are:

Investment          Rate        Yield
Amount                (%)          (%)

Less than 15K          4.80          4.91

 $15K-$49,999       5.05          5.17

$50K and more        5.30          5.43

This account is not a money market and is not FDIC insured.  It is a demand account (I can retrive all of my money at any time) invested in unsecured corporate notes for GE Capital.  In theory, if GE Capital goes belly up…I could lose some / all of my principal.  Given their credit rating, in the 10 years that I’ve had the account, I have found the extra yield to be worth the level of risk. 

My task is to see whether or not I can find anything that is better.  For me, better could also include the same rate I have today, but without any risk (would be FDIC insured).  I think it’s worth checking out.  At the very least, check it each time the Fed makes a rate change and see how it compares to the rest of your available options in the market. 

I began my search with the site I use most frequently for these types of things which is Bankrate.com.  I managed to find some teaser rates and some longer term CDs where I could get an extra boost, but found myself challenged on two fronts:

1) I mentioned previously we were looking into the purchase of a new home.  This could come as early as within the next 6 mos.  Therefore, I can not lock up my money for any period longer than that.

2) Many of the teaser rates were only for a couple of months, and then dropped back down considerably.  I’m not sure it’s worth my time to go through the effort of setting up the account for $10 extra bucks.

 So, I expanded my search and came across bankdeals.blogspot.com.  I thought the site was very current and did a good job summarizing what opportunities were out there and giving you tips on how to sign-up, etc.  In particular, I liked the ability to browse by state.  Also, quite a few comments from readers who have had first hand experience with the various instituitions, etc.  I like this site so much, I’m going to add them to my links. 

I managed to find a 6 month CD yielding 5.75% with Town Center Bank in Illinois.  They didn’t provide a lot of details online, so I will have to call them to learn more about how I might take advantage.  I won’t make a ton as it’s only 6 mos, but maybe up to $150 or so if I invest the max.  I’ll give an update once I learn more.

Not yet satisfied, I continued to look for other opportunities.  In particular, I started searching for opportunities that were similar to the setup with GE Interest Plus.  I tried all kinds of different search criteria and had a difficult time finding much.  However, I did find at one from GMAC.  Their current rate was 5.75% – nice!  However, upon reading the prospectus, I noticed the disclosure about their credit rating being downgraded – not as nice!

I also noticed an additional offering for “SmartNotes” which seemed to be another type of investment in their unsecured debt.  However, the pricing supplement was not readily available, so I couldn’t determine what kind of interest rate was being offered.  Regardless, I’m not sure that an investment with GMAC is the right move for me right now…especially if I can get something similar (as in the CD above) with no risk. 

Although I may not be interested in this particular offering, I am a bit more curious how many more of these are out there and who is offering them.  I will continue to look, but would greatly appreciate if anyone else had some insight / tips on how I might find them.

Going back to more “traditional” options, I found a few more “possibles” on bankdeals.blogspot.com:

Geauga Savings Bank – 5.45% ($25K min and top rate only guaranteed until July)
AmTrustDirect – 5.36% ($1K min)
BankUnited – 5.35% (min $5K)

 Although none of them give me a better rate than what I have currently, they are all FDIC insured.  However, after reading some of the posted comments, I’m not sure they are worth the hassle.

 So, where does this leave me? If not for some of the restrictions I have on the length of term, etc. I think I could get a slightly better return on my cash with less risk by opening a CD.  In fact, if you share my belief that rates are going to fall later in 2007, it would be wise to go ahead and lock up some of that money now.  However, since that is not an option for me at this time, the possibilities are a bit more limited.

 My next steps are to call about the CD I mentioned at Town Bank and if available.  If anyone can point me in the direction of some more demand notes, I still might consider that as well…but only for a very strongly rated company.  Otherwise, I’m probably going to stand pat with what I have currently (which isn’t terrible).  While I’m not terribly happy I was unable to find an obvious, slam dunk winner, I am pleased that I discoveredthe bankdeals site.

Maybe I’ll have more luck finding something when I review checking accounts.

I’d also be interested if anyone has either decided for or against taking advantage of an account like GE Interest Plus.

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