Banks and credit unions are often paying 0.00 percent for the cash you keep with them. In fact, many charge now. Paying nothing for your cash is just another fee from your financial institution. Allan minimizes the cash in his checking account, and finds better places to stash his cash.
His favorite solution for cash he may need soon is in an unlikely place - five-year CDs at Ally Bank. They are currently paying 1.74 percent APY and have a 60 day early withdrawal penalty, which amounts to only 0.29%. If he closes the CD after 61 days, he's earned more than his money market account yielding 0.03 percent. Even with $10,000 in cash, this is a way to spend 20 minutes and earn $174 a year more with your money. That's not a bad hourly wage. Payoff: Allan has a $100K emergency cash reserve earning $2,740 annually at Ally Bank rather than a whole lot of nothing at Wells Fargo, his local bank (the rate was 2.74% when he opened the CDs).
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