Going to the dark side (Synchrony Bank)

Discussion of the Cash portion of the Permanent Portfolio

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dualstow
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Going to the dark side (Synchrony Bank)

Post by dualstow » Fri Oct 16, 2015 2:09 pm

I think I'm going to give up most of my short-term notes and get a 2.25% 5-YR CD at Synchrony bank. That's not so terrible, is it?

Just need to talk to them about about the details. Penalties, etc.
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pariah — 1610s member of a low caste in S. India; Tamil (Dravidian) “drummer”, as members of the lowest caste played drums at festivals. “social outcast,” 1819.
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Re: Going to the dark side (Synchrony Bank)

Post by Xan » Fri Oct 16, 2015 2:15 pm

For me, the major risk of chasing yield with a long-term CD is that if interest rates jump, my "cash" won't be able to take advantage of that for 5 years.  It isn't really "cash" unless its return responds quickly to short-term interest rates.

However, maybe that event is extremely unlikely.
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Re: Going to the dark side (Synchrony Bank)

Post by MachineGhost » Fri Oct 16, 2015 2:19 pm

dualstow wrote: I think I'm going to give up most of my short-term notes and get a 2.25% 5-YR CD at Synchrony bank. That's not so terrible, is it?

Just need to talk to them about about the details. Penalties, etc.
You're doing it wrong.  You need to check the early withdrawal penalties.  According to my spreadsheet which was last updated in early September, Capital 360 and Barclays had the highest 5-year rate and lowest penalty.  Synchrony isn't on the list so they probably suck.  So what you want to do is split your capital into quintuples and buy five 5-year CD's.  I'm sure you can figure out the rest....
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Re: Going to the dark side (Synchrony Bank)

Post by dualstow » Fri Oct 16, 2015 2:22 pm

I agree. What turned the tide for me, Xan, is that my friend said he has the instrument I mentioned above and that although it says, 5-Year, he can pull it out without a penalty after a short period. I didn't have time to bug him about the details, and I'm just going to do my own due diligence directly with the bank.

If I have to hold it for say, 6 months before I can take it out, that would be worth it to me to have 2.25% in interest instead of the ~ 1.19% average that I'm getting on my 3-year notes. I'm not going to take it out anyway, unless things change drastically.

---
Edit: oh, believe me I will, MG. I will check.
“As a white person of colour, I am extremely concerned about the rise of black whiteness.” — Titania McGrath
pariah — 1610s member of a low caste in S. India; Tamil (Dravidian) “drummer”, as members of the lowest caste played drums at festivals. “social outcast,” 1819.
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Re: Going to the dark side (Synchrony Bank)

Post by dualstow » Fri Oct 16, 2015 2:27 pm

MachineGhost wrote: Capital 360 and Barclays had the highest 5-year rate and lowest penalty.  Synchrony isn't on the list so they probably suck.
I just checked Capital 360 and they offer 2.1% Close, but if the penalty period at Synchrony isn't bad, I'll stick with them. As for Barclay's, it's just a matter of time before they get wiped out by some rogue trader. ;-)
So what you want to do is split your capital into quintuples
Into fifths, yes. That's exactly what my friend does. If only I could quintuple it...
“As a white person of colour, I am extremely concerned about the rise of black whiteness.” — Titania McGrath
pariah — 1610s member of a low caste in S. India; Tamil (Dravidian) “drummer”, as members of the lowest caste played drums at festivals. “social outcast,” 1819.
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Re: Going to the dark side (Synchrony Bank)

Post by sophie » Fri Oct 16, 2015 2:33 pm

Totally understandable!! As long as you're spreading your investments to minimize risk, it's kind of hard to pass up free money isn't it?

Do remember that Treasuries are exempt from state and local taxes.  Depending on your situation that may narrow the gap enough that it's not worth making the switch.

You might want to look at Ally Bank's "raise your rate" CD.  The return is a bit lower (2%), but you can get a 4 year CD and change the rate to the current offering twice in that period. 
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Re: Going to the dark side (Synchrony Bank)

Post by MachineGhost » Fri Oct 16, 2015 2:52 pm

dualstow wrote: I just checked Capital 360 and they offer 2.1% Close, but if the penalty period at Synchrony isn't bad, I'll stick with them. As for Barclay's, it's just a matter of time before they get wiped out by some rogue trader. ;-)
Looks like Synchrony and Barclays are tops:

https://www.depositaccounts.com/tools/e ... 65245,5207

Now, assuming I already have a 5-year CD stack, how exactly do I determine if its feasible to break them for higher yields?  I assume that my new average rate should be higher than what my net average current rate is?  i.e. 2.5 yr duration?  Or should we consider the effective annual return after year one, etc vs the new effective annual return for year one, etc.?
Last edited by MachineGhost on Fri Oct 16, 2015 2:57 pm, edited 1 time in total.
"All generous minds have a horror of what are commonly called 'Facts'. They are the brute beasts of the intellectual domain." -- Thomas Hobbes

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Re: Going to the dark side (Synchrony Bank)

Post by Pointedstick » Fri Oct 16, 2015 3:15 pm

Per the table in MG's link, it looks like the penalty-free zone starts at 6 months, but the break-even time starts at a year. That is to say, if you withdraw after 12 months, you've made less in interest (1.12%) than you would have sticking with whatever's giving you 1.19% right now.
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Re: Going to the dark side (Synchrony Bank)

Post by dualstow » Fri Oct 16, 2015 3:20 pm

sophie wrote: Do remember that Treasuries are exempt from state and local taxes.  Depending on your situation that may narrow the gap enough that it's not worth making the switch.
Definitely. That's the number one reason I have never bothered with CDs, well above the fear that I wouldn't get my money back. In fact, my treasuries are held in Fidelity and Vanguard so if there were a run on banks, I'd have to receive a check from those houses, which I would cash where? I don't know how that works and  I guess I don't want to think about it.

I'm in a low tax bracket and my state taxes are low enough. Local taxes are high. Also it just seems less complicated to give up some yield and not even trouble myself with more taxes.

Maybe I should keep buying treasury notes and muni bonds until the pp is large enough that 2.25% interest vs 1.19% is more meaningful.
“As a white person of colour, I am extremely concerned about the rise of black whiteness.” — Titania McGrath
pariah — 1610s member of a low caste in S. India; Tamil (Dravidian) “drummer”, as members of the lowest caste played drums at festivals. “social outcast,” 1819.
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Re: Going to the dark side (Synchrony Bank)

Post by dualstow » Fri Oct 16, 2015 3:21 pm

Pointedstick wrote: Per the table in MG's link, it looks like the penalty-free zone starts at 6 months, but the break-even time starts at a year. That is to say, if you withdraw after 12 months, you've made less in interest (1.12%) than you would have sticking with whatever's giving you 1.19% right now.
Thanks. Hmm, I should really consider doing nothing. The 1.19% is an average on mostly 3-year treasury notes.
“As a white person of colour, I am extremely concerned about the rise of black whiteness.” — Titania McGrath
pariah — 1610s member of a low caste in S. India; Tamil (Dravidian) “drummer”, as members of the lowest caste played drums at festivals. “social outcast,” 1819.
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Re: Going to the dark side (Synchrony Bank)

Post by MachineGhost » Fri Oct 16, 2015 3:32 pm

dualstow wrote:
Pointedstick wrote: Per the table in MG's link, it looks like the penalty-free zone starts at 6 months, but the break-even time starts at a year. That is to say, if you withdraw after 12 months, you've made less in interest (1.12%) than you would have sticking with whatever's giving you 1.19% right now.
Thanks. Hmm, I should really consider doing nothing. The 1.19% is an average on mostly 3-year treasury notes.
But we have to hold 20-25% cash anyway, so you have time in your favor.  The odds that you would need to break a 5-year stack is remote, except when interest rates start rising (and I'm still unclear how to determine when to break or not).

If you're getting 1.19% now you're missing out on 1.06% less taxes.  Is it actionable?  I think I locked in my 5-year CD's at 2% which doesn't seem actionable to me.

EDIT: I just checked to be sure and I'm locked in at 1.75%.  Which after 2.5 years is earning between 1.31% and 1.46% if I break.  Seems to me like its a no-brainer?  I should have been more diligent checking each year at virtual maturity.  Can anyone argue a case why I should NOT break and redeploy into 2.25%?
Last edited by MachineGhost on Fri Oct 16, 2015 3:42 pm, edited 1 time in total.
"All generous minds have a horror of what are commonly called 'Facts'. They are the brute beasts of the intellectual domain." -- Thomas Hobbes

Disclaimer: I am not a broker, dealer, investment advisor, physician, theologian or prophet.  I should not be considered as legally permitted to render such advice!
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Re: Going to the dark side (Synchrony Bank)

Post by Desert » Fri Oct 16, 2015 4:00 pm

I love CD's.  You might check out this Share Certificate:

http://www.kevinoninvesting.com/2015/10 ... on-cd.html

3.04% 3-year Certificate.  The EWP is steep at one year, but it's the best rate I've seen in a couple years. 
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