Emigrant Direct is a division of Emigrant Bank. Emigrant Direct is a member of the FDIC and the creator of the “MyWay” CD (certificate of deposit). Currently, Emigrant Direct is offering a high interest “AmericanDream” savings account at 1.40% and a high yield “MyWay” 5 year CD at 2.50%.

Emigrant Direct.com High Interest Savings Account

With a Emigrant Direct savings account there are no fees and no minimum balance requirements. It’s very easy to open an “AmericanDream Savings Account” which is Emigrant Direct’s high interest savings account. You can open and have access to the savings account 24/7 online.

Emigrant Direct.com “MyWay” Certificate of Deposit

Currently, Emigrant Direct is offering a 5 year CD at 2.50%. They do have shorter term CDS available.

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What do you get with a CD from Wachovia Bank? Firstly, with any CD you earn a guaranteed rate of return known as interest income. However, which each individual bank comes different requirements. Here’s Wachiova Bank CDs Rules and Requirements.

Wachovia Bank CDs Short Term Interest

CDs allow your money to grow. With a Wachiova CDs you earn interest from the date you opening the CD until your maturity date. Your maturity date is the same as the term of the CD. At Wachovia you interest on a CD is compounded daily and is add to you account monthly.

At the end of the CD’s term (Your Maturity Date) Wachovia will notify you. You will have 7 days to renew, change, withdraw funds at that time. If you miss the 7 day grace period, the CD will automatically renew.

Also this seem to be the little dirty secret of the bank world, you can withdraw the interest income each month. You can have the interest income deposited to another account. Interest income doesn’t have to remain with the principle until the term of the CD.

However, the principle of the CD is a different story. If you really need to withdraw your principle before the term of the CD (your maturity date) you will have penalties.

CDs are covered under the FDIC insurance.

Wachovia CDs Available as of 8/6/09 (with a minimum opening Deposit of $5,000)

• 13 Month CD at 1.40%
• 21 Month CD at 1.98%
• 32 Month CD at 2.75%

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The weeks Personal Finance Question with Simple Dollar Answer is a bit different. This week the question come from me and Hanna.

Personal Finance Question — It’s a little weird when a CD offers a lower rate than a regular savings or money market account. Why is that?

Here’s the scenario — ING has an Orange savings account with an interest rate of 1.40%. ING also has a Electric Orange account with an interest rate of 1.65% (accounts over $50,000). However, ING has a 12 month CD with an interest rate of 1.50%. CD interest rates are usually higher than regular savings and money market accounts because of restrictions that CD have.

Simple Dollar Answer — This Simple Dollar answer comes from Nickel. For those who are wondering why CD rates at some banks are lower than savings and money market accounts the answer is — It’s a sign that the bank intend to lower interest rates.

I don’t know whether Nickel is right or wrong, but the answer does seem to fit.

Why do you think this weird scenario of “lower CD rates” are occurring?

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A CD Ladder is a strategy used when buying CDs (certificates of deposits). Meaning, a CD Ladder is nothing more than a plan. Let’s use Jane as an example. Jane wants to save more money. However, in the currently economy saving accounts, and money market accounts are not paying high interest rates. Jane turns to CDs (certificates of deposits). One problem Jane is faced with is — she only has $25,000 which is her total saving. Jane doesn’t want to lock the money into a CD. Why? Jane is afraid that an emergency will come up. This is when a CD Ladder is a good strategy to use.

CD Ladders Explained

• Purchase the longest term CD with the best interest rate. Jane, found a 60 month CD at TD Bank paying 3.00%. Jane takes $10,000 and buys that CD.
• Jane currently has $15,000 that she does not want to lock away for 5 years (60 months) — in case of an emergency.
• Jane decides to purchase another CD from Wells Fargo/Wachovia. This 32 month CD has an interest rate 2.75%. However, Jane must invest $5,000 or more (this is one of the bank’s requirements — bank requirements vary from bank to bank). Jane decides that she can lock this portion of money away for 2 1/2 years.
• Jane currently has $10,000. She decides that she can manage any emergency with $2000. So, she purchases another CD from TD Bank with $3000. This 9 month CD has an interest rate of 1.40%.
• Jane currently has $7,000. She decides to purchase another CD from TD Bank with $5,000. This 48 month CD has an interest rate of 2.75%
• Jane leaves $2,000 in her existing account for emergencies.

CD Laddering Demo

• $10,000 in a 60 month CD at 3.00% = $1,500 in interest income at the maturity date (2014).
• $5,000 in a 48 month CD at 2.75% = $550.00 in interest income at the maturity date (2013).
• $5,000 in a 32 month CD at 2.75% = $366.67 in interest income at the maturity date (2012).
• $3,000 in a 9 month CD at 1.40% = $31.50 in interest income at the maturity date (2011).
• $2,000 in ING Orange Savings account at 1.40%

Use the CD Calculator

As you can see Jane has laddered her CDs to reach a maturity date each year. Jane also elected to receive month interest income payments that are transferred back to her ING Orange Savings account each month. If you elected to have interest paid out during the course of the CD term at maturity date you only received your principle amount. Why would you elect to receive interest income throughout the course of the CD’s term? In the beginning we stated that Jane was nervous about emergencies. Therefore, Jane wants some money each month to calm her fears. Another reason why monthly interest payments are good is if the rates are due to rise. If the rates do rise hopefully you will have enough money to invest in a higher CD rate. Remember, at the maturity date you will have the option to have the CD auto renew (not suggested) or cashed out. Cash out and search for the best rate to invest.

CD Monthly Interest Payments

• 60 month CD = $25.00 per/month
• 48 month CD = $11.46 per/month
• 32 month CD = $11.46 per/month
• 09 month CD = $ 3.50 per/month
• Saving Acct = $ 2.33 per/month

Total Monthly Interest Income for Jane = $53.75. Each month this interest income will grow if Jane does not use the money in her savings account. Why? Jane has elected to transfer the interest from her CDs into her savings account. Her savings account balance will grow and so will the interest she received on it. Hopefully, when rates go up — Jane will have enough money in her savings account to purchase another CD.

Keep on the Cutting Edge with your Finances

• Kiplinger’s Personal Finance magazine
• SmartMoney (1-year)
• Money (1-year)

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We all like and need money, but how do you add up things like interest income? Do you have any interest income? Interest income is money that you earn from interest like: bank savings accounts, bank money market accounts, bank CDs, and other bank accounts. To see how much interest income you’re really earning is just a simple dollar math calculation away.

Simple Dollar Calculation for Adding Up Interest Income

• i stands for interest earn (interest income)
• p stands for principle
• r stands for the rate of interest
• t stands for time

I=Prt (Interest Income Formula)

Simple Dollar Calculation At Work

Suppose you want to invest $3,000 at 5%. How much interest income will you make per/day?
i = ?
p = $3,000
r = .05 (convert % to a decimal)
t = 1/365 (per/day)

I=$3,000 (times) .05 (times) 365

Therefore, I= $.41 (forty one cents).  This is your Interest Income per/day.

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Join the Coffee Club with a twist. What’s the twist? We are not buying coffee we are saving coffee money. Here’s how the Coffee Club works. For the next 100 days we are making our own coffee. The next step is to open a savings account. You will need a separate savings account to track your progress. I’m opening an ING Orange savings account. There is no minimum balance requirement. Your bank’s requirement may be different. Nevertheless, the current interest rate for an ING Orange savings account is at 1.40%. If you want to open a savings account with ING go to their website at INGDirect.

Recap on the Rules of the Coffee Club

• You can not buy (pre-made) coffee for the next 100 days
• Get a jar and start dropping the $5.00 bills in – I’m recommending that you deposit your Coffee Club savings at the end of each week
• You must open up a simple savings account to track your progress
• When you reach your bank’s minimum requirement — deposit your Coffee Club savings. Take the money out the jar and deposit it in the bank. Remember, the ING Orange savings account discussed above does not have a minimum balance requirement. Therefore, at the end of week one you can deposit your Coffee Club Savings into that account

Now it time to input your figures into the Coffee Club calculator. I’m recommending that you deposit your Coffee Club savings once a week. That means, if you are saving $5.00 per/day you will be depositing $35.00 per/week into your Coffee Club savings account

Coffee Club Calculators (click here)

• Coffee Club Savers – Who are you (you can use a nickname or first name only). This is just used as a way to identify one savers from another. Please use the same identifier each time.
• Bank Info – All we want to know is where are the best rates. We don’t want your account number. The only questions in this area are: What’s the interest and At What bank
• Deposit Info – Each time you make a deposit or received interest into your designated “Coffee Club Savings Account” tell us about it. Inspire others with how big your Coffee Club savings has grown.

Coffee Club Calculator

Here’s Your Coffee Club Hook-Up – Get The Coffee Club Savers’ Pack

Why Use The Coffee Club Savings Plan

The Coffee Club is a great way to save and have fun with others. We will be reporting the progress of our Coffee Club Savers. Don’t worry, we are not asking for your real name or any bank account numbers. All we want to know is “how you’re getting along” to prove that saving coffee money can be a big deal. And maybe share some information with other savers. By reporting interest rates we will all see which banks are offering what rates and don’t forget competing in something inspires people to do great things.

Within 3 1/2 months you should be somewhere around $500 dollars. It’s know time for the next step. Take your $500.00 and open a CD. I recommend opening a CD at TD Bank. Currently the best offer is a 60 month CD at 3.00%. Who knowns, in 3 months we could be getting better rates elsewhere. Nevertheless, continue updating the coffee club calculator with the interest income each month. With a CD you can elect to withdraw the interest each month, and have it transferred to another account; or you can wait for the end of the CD term and get the lump sum.

I’m focus on creating a living wage with interest income and passive income sources. Therefore, I have elected to withdraw the interest income each month. The other reason why I have elected to withdraw the monthly interest is — if a better rate comes around I want some money available to invest. The decision is yours.

Once you’ve invested in a CD, other than reporting interest to the Coffee Club calculator you’re pretty much done — NOT. Do it again, now that you know the value of saving you should be able to rake the money in. And don’t stop at coffee, make some more cuts into your expenses and save — save!

Coffee Club Savers’ Reports are coming soon (once number start coming in)! Bookmark this site to track the Coffee Club Progress.

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Interest rates can vary because of different factors. However, the basis of where interest rates are derived from fall in three categories. Interest rates categories are: What you pay, What the Bank pays, and What it pays you.

What you pay — Interest rates that you pay come in the form of interest rates on loans, credit cards, mortgages and the like. This interest rates is loose based on the Fed Fund and Prime Rate. Banks usually have their own calculation to decided what the interest rate for a given product will be. However, the Fed Fund and Prime rate is always part of that equation. Banks stay competitive when they adjust their equation differently from other banks and financial institutions. Also included in factors that contributed to what you pay in interest is you. Included in this category of interest is risk. Risk equals your credit rating and this accounts for why some people pay more than others.

What the Bank pays — Banks loan each other money, all day every day. The interest rates charged to other banks is the Fed fund. In the news currently you have been hearing that the Fed fund interest rate has been falling. The Feds do this to control the market. When the Fed fund is low, the result is a lower interest rate on what the bank pays you, increase in bank fees and other ways to compensate for a low Fed fund.

What it pays you — This interest rate is the rate of return on your investments with banks. Investments with banks could be CDs, money market accounts, and/or saving accounts. Again, this interest rate is make up from a calculation that the bank does. However, when the fed fund is low you will usually see a decrease in the interest rates the bank pays you.

So now you know all about interest rates.

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At the beginning of this year I realized life was changing for me. Not only did I become an empty nester, I also realized how much interest income I was missing out on. When the recession hit me, I realized that I needed to up my game as far as investing is concern. I use to dump money in a money market account and forget about it. That’s when I was getting 4.9%. However, that same money market account is now at 1.6%.

My mission begun with research. I’ve learn many things that I should have known. My first step to re-investing my money better was investing money in CDs. Currently, they are the safest and highest interest rates around. I have found a CD that pay 3.0% at TD Bank. I’m still trying to figure out a good strategy with CD investing. I believe the trick is all about “timing”. In order to get 3.0% in this bad economy I had to go for a CD with a 60 month term. That’s 5 years. That means, that although I have the interest income paying out to another account, I can’t touch the principle balance. I figure the worst case scenario is that interest rates will increase, and I will still be locked into the 60 mo CD. It was a risk I was willing to take. Why?

I didn’t invest all my investment funds into the 60 month CD. I left some of my investment income in a money market account, for easy access. I also purchase several other CDs with different terms. My plan is to have a portion of money come available each year that I can re-invest in the best thing smoking.

My second step was to reduce every bill I could. I have successfully reduced my home phone bill. I know the trend is to get rid of your landline, but I’m from the old school. So, instead of turning off my home phone I cancelled all on the optional features. My new home phone bill is now currently $21.00 per/month. I also reduced my car insurance bill by increasing my premiums. And as I stated above, I now an empty nester so I’m saving that way too.

Lastly, I plan to reduce my expenses to under $2000 per/month and increase my interest income to $2000. Get the point — yet? My goal is to live off of interest income. Wish me luck. Stay turn to see how I’m doing. If I do well, you could try some of the steps yourself.

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I recently purchased three CDs – Bank Certificates of Deposits — Why? Because the interest rate on my money market account is so low I think I could earn more by putting the money on a lottery ticket. Not really, but CDs have a higher interest rate and more restrictions. Here’s what I learned about Bank Certificates of Deposits.

Best Money Deposits:

• Best Money Deposits Tip – Certificates of Deposits (CDs) offer higher interest rates because of the restrictions. Most CDs restrict you from withdrawing your principle balance until the end of the CD term. Meaning, if your CD term is 60 months (5 years), you must leave the balance you open the account with in for the entire 60 months. However, you can have your CD’s monthly interest transferred to another account. For example: You open a CD with $15,000 dollars @ an interest rate of 3.00%. Each month you can have $37.50 transferred to another account — like a savings or money market account. Why is that important? It’s important to have some income coming from the CD over 5 years, although the principle amount is untouchable.
• Best Money Deposits Tip – You can set up your certificates of deposits to pay you the monthly interest income. See the example above. Here’s why you may want the monthly interest — let’s say you need $2000 dollars a month (for monthly expenses). You can purchase enough CDs to gross that amount in interest monthly.
• Best Money Deposits Tip – If you purchase several CDs, as I did — all your money won’t be untouchable. Meaning, if you purchase 3 CD’s one at 60 months, another at 18 months, and the last one at 9 months — you can see that I have plan to receive money at different times. Also, if you purchase several CDs when a better rate comes along you will be in a best position to take advantage of it.
• Best Money Deposits Tip – You don’t have to renew your CD. At the maturity date you have the option to cash in the CD. You don’t have to let the CD roll-over. As I have said above, if there is a better interest rate available — cash in the CD and purchase the CD with the better interest or better duration.
• Best Money Deposits Tip – I have learn that the best interest rates come with bank certificates of deposits with longer durations. Meaning, I have three CDs –

1. 1. Bank Certificates of Deposits – 60 months (5 years) @ an interest rate of 3.00%
   2. Bank Certificates of Deposits – 18 months @ an interest rate of 1.75%
   3. Bank Certificates of Deposits – 9 months @ an interest rate of 1.40%

Again, I purchase three with different duration to have money available to me and not locked away for 5 years. Although, if you can afford to have the principle balance untouchable for 5 years — that’s the best deposit.

To find the Best CD rates go to Money Rates/Best CD Rates

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