Why do CD rates vary so much by length of term at Chase bank?

Submitted by ncrowley t3_11dgqow in personalfinance

I would like to save some cash for a trip in 6 months. I thought the easiest way to save this money might be a six month CD. When I checked Chase for their rates, I noticed that the six month CD rate is 0.05%, while the three month CD rate is 3.50%. The 12-month is 3.25%, while the 18-month goes back down to 0.05%. Why are these rates so drastically different? And why would the shorter term have a higher rate? The pattern in this table looks paradoxical to me: https://www.chase.com/personal/savings/bank-cd

As an aside, would anyone recommend an option other than CDs for a 6 month time horizon?

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fluffy_bunny22 t1_ja8hf6i wrote

They need more money for the length of the terms that they are offering higher rates for. A bank determines what their money needs are in advance and for how long they need that money.

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JellyDenizen t1_ja8hije wrote

Ally's offering 5% on an 18-month CD.

Not really any rhyme or reason on the rates - they're based on each bank's expectations and predictions about what rates will be in the future, and the banks don't all think the same way.

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EchoInExile t1_ja8hunj wrote

Brokered CD’s at 6m right now around nearly 5%. Including an FDIC insured Chase CD at 4.9.

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ncrowley OP t1_ja8kihz wrote

Wow, thanks. I did not know about this!

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vinyl1earthlink t1_ja8nun7 wrote

Right now you can get 5.08% of a 6-month Treasury bill, and there is no state income tax on that. That's what I would recommend.

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Birdy_Cephon_Altera t1_ja8mdkh wrote

Can't speak for Chase specifically, but our bank sets its CD (and other savings product) rates based on what the competition is offering. They do a survey of all of the banks that are their main competitors in the region every week, and then use that information when setting new rates on various products. If there is some bank that they consider a significant competitor for new-to-bank funds that is offering a higher rate on a certain length term CD, that could explain why that particular product is higher than others.

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Unlucky-Clock5230 t1_ja8i18q wrote

Why have them locked in a CD for any length of time when you can use an HYSA that has both full liquidity and a higher rate?

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ncrowley OP t1_ja8iqhu wrote

Thanks for the suggestion. Could you point me to an example?

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Unlucky-Clock5230 t1_ja8j49g wrote

Just Google HYSA rates. I would also check nerdwallet, I trust them with their assessments.

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Recover_Practical t1_ja8kqou wrote

I googled it best I could find was 3.85% with Citi. Do you know of anything better?

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kickskunk t1_ja8pp4w wrote

CD's usually out performs HYSA and they are fixed rated interest for the length of the term. HYSA are variable which can go up and down. Usually they go down over time. Also you can ladder CD's and keep climbing. So you have some flexibility when the shorter terms matures.

Plus if you have a spending problem a CD can help prevent you from withdrawing money as you will be penalized for it.

HYSA are good for emergencies dont get me wrong, but for parking money for near future purchases ranging from Christmas gifts up to a downpayment for a house, a CD is superior.

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