Melrose CU progress
Got forms and disclosures from Melrose. One of the shortest fee schedules I have ever seen for a financial institution. Also some of the lowest fees.
Membership in the credit union is open to anyone. This is different from most other credit unions that have a specific industry(s) or geographic areas that they serve. It doesn't matter were you live or work.
They also have a 5 star rating from www.bauerfinancial.com which is the best you can get.
Rolling a maturing CD to them was a simple process requiring an IRA application, a beneficiary designation and an investment selection. Got a check from the old holder of the IRA CD made payable to Melrose FBO IRA (my name) and sent it to Melrose.
If you don't need to physically go to the bank, this might be a good institution to do your banking through.
Appreciate any feedback on this credit union.
Melrose CU update – CD Penalty
Account opening went smoothly. As mentioned application was created and approved on-line with a printed version sent in.
Got a package of material back yesterday. Included IRA application and CD purchase form. On the 12th, when my other CD matures will send in forms to open the CD.
One big surprise is the penalties for early withdrawal from any CD product offered by Melrose CU. Three months interest on anything 1 year or less, and 6 months interest on anything over 12 months. The interesting thing is that in both cases the interest rate on the CD then drops to 1.5% for the remainder of the term. Pretty tough penalty.
Have not seen this harsh a penalty before. Suspect it is legal since it is disclosed clearly up front.
Great CD rate 3.91%
Found a 3.91% APY on a 5 year CD at Melrose Credit Union. Was able to complete the application on-line and get an acceptance notification e-mail shortly afterwards. Had to print the application for membership and mail it in with a $1 membership fee and a $25 share (savings) deposit. Will be interesting to see if they will honor the rate in two weeks when my current CD matures. I have made that request on the application. Will let you know what happens.
The reason I am looking at a 5 year CD is because I built a ladder starting in the fall of 2007. A piece of it matured several weeks ago and I was able to get 3.75% at Mechanic's Cooperative Bank in Taunton, Mass. This next piece that matures on 9/12 will probably go to Melrose Credit Union. Their financial statement is on their website and looks very strong.
Two more examples of small institutions offering better rates than the big guys.
Check back in a couple of weeks to see how I made out. Also, would appreciate any feedback from those who have done business with Melrose CU.
It pays to ask
I had a CD maturing last week. One of those I was Laddering over 5 years, since the fall of 1987. Wanted to put it into a 5 year CD at the best rate I could find. Had found a great rate of 3.75% at www.Mechanics-Coop.com but when maturity date came the rate had been dropped to 3.50% two days before. I asked branch manager for the higher rate, he made a call, and I was given the higher interest rate. That was a 7% improvement in the rate of return on this CD.
Lesson learned, ask and maybe you shall receive.
Best rates may be in your backyard
Several of my recent CD investment decisions have benefited from a search of local community institutions. Although the Best Rate services gather a tremendous amount of rate data they sometimes miss community banks and credit unions. These smaller organizations can be an excellent choice. You may have to visit them in person to open the account, but you could find some really good deals.
For example, Mechanics Cooperative Bank, Taunton, MA offered a 3.75% APY on a 5 year CD in early August, 2009.
Let me know if you have found similar opportunities in your local communities.
Many community banks and credit unions have stuck to the basics of their business. They are sometimes willing to pay a little above the going local market rates.
When Rates Are Up
When the interest rate trend is upward it is best to switch to having the interest on your CD portfolio reinvested in new CD's instead of being compounded into the existing CD's. This allows you to take advantage of higher rates each time interest is paid on your existing CD investments. A portion of you portfolio in a laddered CD structure is also always coming up for renewal. This allows you to take advantage of the higher rates without having to get out of a single CD investment whose maturity is well into the future.
When Rates Are Down
Laddered CD's do extremely well when interest rates are going down. This is also a time when the economy may not be doing to well. If you have a 5 year ladder set up in this environment only 1/5th of your investment will be re-pricing at the current lower rates and 4/5th will stay at the higher earlier rates. Thus you end up dulling the effect of falling CD interest rates. Also, if you continue the ladder strategy you will be looking to replace that maturing CD with a long term CD which should offer a higher rate of return then a short term investment.