Marcus has increased their 11-month no-penalty CD from 3.80% APY to 4.00% APR. I’m using it as a replacement for a conventional high-yield savings account.
Background
Not long ago, Marcus ran a nice transfer promotion to get a $1,500 bonus when depositing $100,000. There were also other promotions.
After the promotion period ended, I intended to transfer the funds back to a brokerage and buy the SGOV ETF from which pays a high interest rate and the interest is largely exempt from state taxes, as the fund primarily buys US Treasury bonds.
However, after comparing rates, I noticed that Marcus No Penalty CD would give me a similar yield to SGOV:
The extra 20% from Marcus is about the same as the state tax savings for me. Those with high city/state taxes or in high tax brackets may do the calculation differently.
The beauty of a no-penalty CD is that it’s very similar to a savings account — except you don’t have to move money in and out. In my case, it’s cash that I don’t expect to need anytime soon, so I don’t mind ‘locking’ it to a CD without penalty.
Rate increase
When updated our best High Yield Savings Accounts postI was pleasantly surprised to learn that Marcus has grown up 11-month penalty-free CD at 4.00%.
And so I closed the current CD with no 3.80% penalty and the funds were transferred to my regular Marcus online savings account.
Included in the transfer is all daily interest since July 1st. Interest is compounded daily and paid monthly on the last day of the month. When I close the CD, they immediately add interest on the transfer.
All funds are immediately available in the savings account, and then I was able to immediately open an 11-month 4.00% CD with no penalty.
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Right now, that 4% rate is more than I would earn with SGOV, even after accounting tax advantage of SGOV.
There is a simplicity to having a product that goes up and down with the market like SGOV. And you can move funds in and out at will.
But penalty-free CD has the advantage of a deadlock rate in cases where event rates decrease. And for most people, it currently has a better yield (unless you have very high city/state taxes).
