|by Mr Credit Card|
This is an interview with Dan Nelson from BankVibe.com. I came across this site recently and it has tons of information about CD Rates. If fact, if you are shopping around for the highest CD Rates, I would recommend this site. You can subscribe to Dan’s RSS Feed here.
Mr Credit Card : Dan, just as an introduction, when did you start this site and what was your motivation?
Dan : I started BankVibe.com in November of 2008 mainly because I have always been interested in sniffing out the best investments. Whether it be stocks and bonds, real estate, or bank deposits there is always research to be done before committing to any investment. Needless to say, stocks, bonds, and real estate investments have been out of favor recently and I have found that investing in FDIC insured bank deposits to be much more safe and economical as well as a cornerstone to a well-diversified portfolio. What makes investing in bank deposits, money market accounts, high interest savings accounts, and other banking products so fascinating is the nature of the competition between banks. Interest rates in which one can yield through these bank products is forever changing due to economical conditions and the overall state of the banking industry. That is why in-depth research and due diligence is of the utmost importance when researching bank rates. BankVibe strives to find the nations best savings rates on a daily basis and makes this information available to it’s viewers in a user friendly manner.
Mr Credit Card : When one is looking for bank to invest in a CD, what are some of things to look out for (aside from the CD rates).
Dan : There are several things to look out for before committing to any bank investment. Perhaps as important as APY rate is the financial stability of the bank. Until the recent collapse of the banking industry I believe this aspect of research was largely left out. Today, if you look-up virtually any well-known bank on the stock exchange you will probably find that this bank is now a penny stock or close to it. However, the federal government has stepped in to hedge against this liability by raising the FDIC amount to $250k for all bank deposits, making your investment virtually risk free.
Mr Credit Card : With the financial crisis, many consumers are worried about whether their money is safe with banks. What sort of insurance does the FDIC provide?
Dan: As I stated above the federal government insures bank depositors up to $250,000. This limit recently rose from $100,000 during the Fall of 2008. Therefore you can have confidence that, even if your bank goes under while you are investing there, the federal government will be responsible for making sure that you get up to $250k of your investment back.
Mr Credit Card : Even though your deposit is guaranteed by FDIC (up to the limit), does it mean that you do not have to do due diligence on banks?
Dan: Absolutely not. Although banks would like you to believe your deposits are “risk-free” they are not. No investment is ever risk free, but I would confidently say that out of all of the available investments on this planet, bank deposits are as close as it gets. On a side note, last week the Icelandic government/economy virtually collapsed and many people blamed Iceland’s banking industry for this. They were offering too high of rates for their deposits and thus, could no longer afford to payout the investors’ their principle plus interest earned. If our government/economy were to collapse in the same respect I wouldn’t hold much faith in an institution such as the FDIC.
Mr Credit Card : Many investors about worried about our federal fiscal situation and that most of the proposed fiscal stimulus will be financed by foreign investors. Most investment bank’s research suggest the dollar will depreciate in the medium to long term. If someone wants to invest in a foreign currency CD or even deposit, how does one go about doing that? Are foreign currency deposits insured by the FDIC? And if so, what is the amount insured?
Dan: Recently at BankVibe.com I have noticed through our comments a strong community of foreign bank investors whom absolutely swear by foreign CDs (cetificate of deposits). That being said, I would suggest using STRICT filters when investing in foreign banks. If the bank doesn’t have a 24 hour customer support team I would stay clear and if the bank doesn’t have a reputation of 100% timely and full payments I would stay clear as well. If you’re after above average interest rates but aren’t looking to invest a large sum of money (say $25k or less) I would suggest using a high interest checking account. Most local credit unions offer promotional rates yielding anywhere from 2-6% APY depending on your geographic location.
Mr Credit Card : If a consumer wants to do some basic research on banks, where should he or she start? How would you go about doing it?
Dan: If you have a decent amount of money that you would like to stash away I would start by looking through BankVibe’s top CD rates and CD Rate chart to get a feel for what type of returns to expect. If you’re looking for an investment with more liquidity I would search through BankVibe’s savings account rates and high interest checking account rates to compare bank rates. Once you have found a few banks with rates that you like you can search through BankVibe’s bank reviews to see what others have to say about that bank.
Mr Credit Card : Dan, thanks for your time and insights into the world of CD investing.
Dan: Thanks for having me!
Once again, check out Dan’s site for CD Rates. If you have any questions about CD investing, you can also post your questions here and we can get Dan to answer them for you here with another post.