My bank offers a a 2.25% savings account. They also offer a 2.35% no penalty CD. This sounds like a straight upgrade with no downsides (ignoring a 7 day minimum holding period). This sounds too good to be true, is there some catch I'm missing?
Your question indicates you are probably not comparing these two products well. In addition to interest rate you need to consider:
- Minimum Investment
- Holding period
- Penalty for early withdrawal
What is the minimum investment for the 2.35% CD? Do you have that amount? If so, then you might want to go for it. This bank seems to be attempting to generate new business by offering excellent rates.
At the time of this writing 2.25% is the best rate for brokered 3 month CDs, and you have to go 9 month CDs to get 2.4% (that can be traded and not surrendered). This bank's savings rate is beating Ally, Synchronicity, (both 2.2%) and Amex (2.1%).
Is the CD you are quoting only open to new customers? Do they only let you have one of those CDs? If that is the case, you might want to leave some in savings to prevent closing out the CDs early.
Keep in mind that the difference you are talking about is $10/year on $10,000. It is just not life changing money, and as Kevin points out the work you may have to do to earn that extra money may not be worth your effort.
If your rate of 2.25% is variable, then if interest rates go up to 2.45% you don't automatically benefit from those rates using the no-penalty CD (though you could cash out your no-penalty CD and reinvest at those rates).