Money Management

With some banks offering CD rates of over 5%, CDs can be extremely profitable. Find out how much you’d make with different amounts over different terms. [[{“value”:”

Saving money can be like doing an uphill obstacle course. Not only do you need to squeeze cash from your budget so that you can save it, but you also need to figure out which account makes the most sense. With top CD rates at more than 5% right now, they can certainly be a lucrative option. The question is, how profitable are they really?

What makes a CD lucrative?

CDs come in different flavors. For the most part, when you put money into a CD you commit to leaving it alone for the full CD term. Otherwise, you will have to pay an early withdrawal penalty which can eat into your gains.

Assuming you don’t withdraw your funds early, the following factors will influence how much money you might make from a CD:

The amount you investThe length of the CD (also known as the CD term)The CD’s APYWhether you reinvest your interest along the way

One great thing about a CD is that the APY is locked in for the whole time. So, unlike, say a high-yield savings account, you know exactly what you’ll get. If you open a 3-year CD today with an APY of 4.00%, that’s the rate you will get for the whole three years. If you put $5,000 into that CD and reinvested your gains, it would earn almost $625 in total.

Here’s how lucrative buying CDs can be

The current high interest rate environment has turned CD logic on its head. It used to be that you’d get a higher rate if you were willing to lock your money away for a longer period. But right now, banks think the Federal Reserve will cut rates in the near-ish future. That means you can get higher APYs on shorter terms because banks don’t want to commit to paying today’s high rates for longer periods.

If you put $1,000 into a CD

As with many financial products, it is important to shop around to find the best deal for your situation. Some banks might pay extremely competitive rates on short-term CDs, while others may stand out for their longer-term options. Others might have minimum deposit requirements that don’t fit with your finances.

Here’s how much you might make if you put $1,000 into various CD terms available today:

If you put $5,000 into a CD

Some top CDs have higher minimum deposit requirements. As such, if you’re able to invest $5,000 you may be able to unlock better rates. Here’s how much you might make if you put $5,000 into various CD terms today:

If you put $10,000 into a CD

If you’ve got $10,000 in savings, congratulations. It’s a significant amount. Before we jump into what you might gain by putting that money into CDs, it is worth thinking about whether CDs are the best place for that kind of money.

CDs are savings vehicles rather than investments. That makes them safer than, say, investing in the stock market. But you might be able to get better returns through an investment account. This is especially true if you have an emergency fund and you know you won’t want to touch that money for the coming five to 10 years.

That said, there are many scenarios where lower-risk saving strategies make sense. Here’s how much interest $10,000 in CDs could generate.

CD laddering

If you have $5,000 or $10,000 to put into a CD, it is worth looking into CD laddering. This involves splitting your money into different CD terms — perhaps you’d break it into 1-year, 2-year, 3-year, 4-year, and 5-year CDs. The advantage here is more flexibility. Rather than locking up a lump sum for a long period of time, you’d be able to access your money when each individual CD matures.

It is a bit harder to predict how profitable this would be because we don’t know what rates will be available when each CD matures. There’s certainly an argument for locking in today’s high rates on the basis that they won’t last forever. Conversely, if flexibility is more important than getting the highest APYs, a CD ladder could make sense.

Bottom line

Depending on how much you can put in a CD, today’s high rates can make them an extremely lucrative option. When you’re running the numbers, bear in mind that these APYs are unusual. At some point, the Fed will cut rates, and savings rates will fall. There’s a lot to be said for locking them in while they last.

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A high credit score doesn’t guarantee approval for a credit card. Learn about why your application could be denied even if you have excellent credit. [[{“value”:”

A credit score of 800 or above is about as good as it gets. It’s a sign that you’ve been managing your credit very well. And it’s more than enough to meet the requirements for the lowest rates on loans and the best credit cards on the market.

So, if you get denied on a credit card application, you’ll probably wonder what happened. There are many reasons card issuers deny applications. But when you have an exceptional credit score, denials are often due to one of the following factors.

1. You’ve opened too many credit cards

This is the one I’ve experienced the most and that I’ve heard about the most among others with high credit scores. Credit card issuers consider how many credit cards you have and how many you’ve opened recently. If you frequently open new cards, that can lead to a denial.

One reason card issuers do this is to weed out churners — consumers who open a credit card, earn the sign-up bonus, and then move on to the next card. These generally aren’t profitable clients for credit card companies.

Some card issuers even have application rules related to the number of cards an applicant has opened. For example, credit card enthusiasts have long known about the Chase 5/24 rule. If you’ve opened five or more credit cards in the last 24 months, Chase will almost always deny your application for that reason. It’s not an official rule, but it seems to be accurate.

The best solution is to slow down on your credit card applications. Wait at least six months to a year between opening new credit cards. Or you could try applying for a card from another card issuer.

2. You don’t meet the income requirements

Your credit score is one of the most important factors in the credit card application process. The other key factor is your income. Just like your credit score, if your income is too low, it could lead to a denial.

There’s no set minimum required income for a credit card. It depends on the card issuer, and card issuers don’t make this information public knowledge. It also depends on the card you want. Many cards, particularly high-end travel rewards cards, have a minimum credit limit. You’ll only be approved for these if the card issuer is willing to issue at least that much credit to you.

Note that you can include more than just your personal income on a credit card application. If you’re at least 21, you’re allowed to include any income you can reasonably expect to access. So you could use your total household income if you live with a spouse or partner. Scholarships, grants, and retirement fund distributions are other examples of acceptable income.

3. Your credit is frozen

A credit freeze is a good way to protect yourself from identity theft, a crime that impacted over 1 million Americans last year, according to the FTC. Victims of identity theft often freeze their credit so no one can open an account in their name.

But unless you lift the credit freeze, you won’t be able to open any new accounts either. If you froze yours a while ago, it’s easy to forget about it by the time you decide to apply for a credit card again.

To solve this one, thaw your credit to temporarily lift the freeze or unfreeze it entirely. You can do either online with the credit bureaus, and they have an hour to fulfill your request. Once that’s done, call the credit card issuer to let it know what happened and ask it to process your application again.

Those are some of the most common reasons your credit card application could be denied, even with a high credit score. You’ll also receive a letter in the mail from the card issuer with the exact denial reasons. If you really want the card, remember that you can call the card issuer and ask for a reconsideration. It doesn’t always work, but it’s worth a shot.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Lyle Daly has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends JPMorgan Chase. The Motley Fool has a disclosure policy.

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Most banks won’t let you withdraw more than $1,000 of cash (or so) per day from the ATM. Read on to learn about the Bank Secrecy Act and its impact. [[{“value”:”

Have you ever noticed that your bank has daily withdrawal limits on the amount of cash you can take out of an ATM? Some bank accounts will let you adjust the ATM withdrawal limit if you want to take out more cash (or limit your account to a lower amount of cash per day).

But there’s one big rule for how much cash you can take out of an ATM: $10,000 per day. That limit is set by the federal government. And if you try to get more than $10,000 of cash per day out of your checking or savings account, you could get in trouble with the law.

Let’s look at why you can’t withdraw more than $10,000 from an ATM, and what this could mean for your personal finances.

Bank customers can only get $10,000 of cash per day

Most people might not know this, because the typical bank customer doesn’t need to withdraw thousands of dollars of cash from checking or savings at once. But bank customers are only allowed to take out $10,000 (or less) of currency (cash or coin) without scrutiny per day. If you need more cash than that, the bank is required to file a Currency Transaction Report (CTR) with the federal government.

Because of this $10,000 cash limit, most banks will not let you withdraw anywhere near that much money from an ATM. Many bank accounts have daily limits on ATM withdrawals that are much lower, such as $1,000 or less. (You can also choose your own ATM withdrawal limit on your bank account, but it has to be within the bank’s own limits.)

Currency Transaction Reports: Fighting money laundering

Currency Transaction Reports (CTRs) are part of how banks conduct business, as part of the Bank Secrecy Act (BSA), a federal law that’s intended to fight money laundering. Criminals often want to “launder” the cash they get from illegal activities by moving that cash into the financial system. Sometimes they try to do this with large numbers of cash deposits.

For example, a major U.S. bank was recently accused of failing to comply with anti-money-laundering regulations. Some of the bank’s branch employees (who have since been fired and charged with financial crimes) allegedly took bribes to open fake bank accounts for over $653 million of illegal cash deposits from drug cartels.

Why bank customers like you need to know about Currency Transaction Reports

Preventing money laundering by drug cartels is an extreme example of why banks need to use Currency Transaction Reports. Most people who are trying to deposit (or withdraw) large amounts of cash are not criminals. There are many legitimate reasons for people to deposit or withdraw thousands of dollars of cash at once, such as buying or selling a vehicle, or depositing income from a cash-based small business. But banks are required by federal law to keep a closer eye on transactions involving large amounts of cash.

Be aware that the $10,000 cash limit applies to cash deposits and cash withdrawals. If you’re trying to move $10,000 per day (or more) of cash into or out of a bank account, don’t use an ATM — go talk to the bank staff. The bank might ask you to show identification and explain the reason for your cash transaction. If you need more than $10,000 of cash, you can get it — but the bank will file a Currency Transaction Report; and banks don’t have to tell you when they’re filing CTRs, unless you ask.

Don’t worry; having a CTR filed doesn’t mean you’re in trouble or under surveillance. Millions of CTRs are filed each year in the background noise of the banking system. If you’re not involved in crime or suspicious activities, you likely won’t ever have to answer any questions about your banking activity.

But don’t try to avoid having a CTR filed about your banking activity, either. If you make multiple cash transactions in one day or multiple days in a short period of time that combine to exceed (or get close to) that $10,000 limit, you can be charged with a crime called “structuring.” It is illegal to knowingly set up or “structure” your cash withdrawals (or deposits) in a way that attempts to avoid triggering a Currency Transaction Report.

Bottom line

Most bank accounts won’t let you take out more than $1,000 (or so) of cash per day from an ATM. But even if you have a higher ATM withdrawal limit, you can’t withdraw more than $10,000 of cash per day from an ATM. That’s because banks are required to report cash transactions over $10,000 with Currency Transaction Reports, as part of federal laws against money laundering and financial crime. Knowing the rules about $10,000 cash withdrawal limits can help you have a better banking experience and avoid running afoul of the law.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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Think a CD is a good place for your nest egg? Read on to see why you might be selling yourself short. [[{“value”:”

There’s a reason so many people are interested in opening CDs right now. A lot of CDs are paying 5%, which is a pretty great deal for a risk-free return.

If you have money you’re saving for a short-term goal, then it pays to take advantage of today’s CD rates. But a CD is not the place to put your retirement savings if your golden years are still decades away. Here’s why.

1. You might do way better with stocks

The idea of earning 5% on your money may sound nice, but what if you could score a 10% return on your retirement savings instead? If you load up on stocks instead of CDs, that may be more than possible, because the stock market has delivered an average annual 10% return over the past 50 years.

Let’s say you decide to start saving $300 a month for retirement, and you continue to do so for the next 30 years. Even if CDs continue to pay 5% over that time (which they likely won’t), that gives you a $239,000 nest egg. But if you invest your money at a 10% annual return, $300 monthly contributions over 30 years could leave you with $592,000 — roughly 2.5 times the nest egg you’d have with CDs.

And remember, these numbers are assuming a 5% yearly return on CDs. In reality, the gap between a CD and a stock portfolio is likely to be much bigger.

2. You have time to ride out stock market volatility

It’s pretty clear that stocks are the more lucrative bet for retirement savings. But what about the risk?

It’s a valid concern. With CDs, your deposits are protected as long as they don’t exceed $250,000 at a FDIC-insured bank. With a stock portfolio, you could lose money during a market downturn.

But you should remember that the stock market has a strong history of rewarding long-term investors. So if you’re saving for retirement over a period of several decades, you have time to ride out periods of turbulence.

The 10% average stock market annual return talked about above includes years when the market did well and years when it absolutely tanked. But that should help you get more comfortable with the idea of putting long-term savings into a stock portfolio, because even when accounting for those down years, you’re still looking at an impressive return overall.

3. You won’t be doing yourself any favors from a tax perspective

Retirement savings plans like IRAs and 401(k)s allow you to enjoy tax breaks on your contributions. And while you might be able to open a CD inside of your IRA, there are no tax breaks for opening a CD outside of an IRA or 401(k).

In fact, the interest you earn on a CD is taxed at your highest marginal rate. When your investments gain value in an IRA or 401(k), you don’t pay taxes on them year after year like you do with a CD.

Putting your retirement savings into CDs is a move you might regret. Use CDs for their best purpose — short-term savings goals you want to meet.

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Click here to read our full review for free and apply in just 2 minutes.

We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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