Here at BestCashCow, we have been a fan of the No Penalty Certificate of Deposit since Ally began offering it years ago. It ordinarily offers depositors a slight improvement over a comparable savings rate at the same online bank. Since this product can be terminated easily online with no penalty, it is basically a savings or money market account wearing a different skin (i.e., a different name).

In an environment where interest rates are falling, the product is especially good as you lock into a higher rate than savings and have some protection against falling rates.

Interest rates probably won’t fall in 2019, but the product remains appealing as a way to generate a better savings rate.

The two main disadvantages of No Penalty CDs are:

First, you will need to terminate the entire CD in order to make a partial withdrawal (as is the case for most CDs). Since it can be terminated without any penalty at any time after the first few days, and then a new one can be opened, this is more of a nuisance than a disadvantage for some.

Second, in a rising rate environment, this product only works for those who check rates regularly. Competitive savings and money market rates - including those offered by the same very online bank - can and do go above the No Penalty rate that you are locked into, and if this happens you will want to terminate the CD and move back to the savings account. The good news is that if the bank raises the No Penalty rate, you can terminate (again with no penalty) and reopen a new one at the higher rate in seconds.

Ally Bank is the most prominent player in the No Penalty area and has offered an 11-Month No Penalty CD for years. The best rate is usually only available for those with $25,000 or more to invest. Since Ally is currently offering a 1.90% rate for online savings and a 2.10% rate for this product, we think that it is more attractive at the moment than their current savings rate, so long as you have the $25,000 to invest.

CIT entered this market earlier this year with an 11-Month No Penalty CD that offers a 2.05% rate. However, since CIT is now offering 2.15% in its Savings Builder account, we think that product is better for those meeting its requirements (depositors maintaining a $25,000 minimum balance or who deposit $100 each month).

Marcus began offering its first No Penalty CDs yesterday when they introduced a 13-Month No Penalty CD at 2.15% with only a $500 minimum deposit. Since Marcus’s online savings rate is now 2.05%, depositors considering opening accounts and existing depositors are likely to find this attractive.

No Penalty CDs aren’t for everyone. As noted above, you shouldn’t consider them unless you do not anticipate needing the principle often and quickly and you are prepared to follow rates. But, if you meet these criteria, they just might be worth a look.

BestCashCow lists all online No Penalty CD rates and other special CD rates here. You may also find No Penalty CDs and other special CD rates from local banks near you here.

Here at BestCashCow, we’ve always been big proponents of earning the highest possible interest on your cash accounts (savings, CDs, checking). We are also big proponents of maximizing your credit card travel rewards by using the most valuable cards for your spend.(hyperlink /credit-cards)

We’ve noted as recently as yesterday that Chase is simply not competitive with the leading online banks when it offers 0.01% interest. It is remarkable that some customers continue to deposit large sums with Chase at that rate. It simply makes no sense.

Those who follow our credit card section know that we also value Chase’s Ultimate Rewards points – earned through the Sapphire Reserve Card and the Sapphire Preferred card – at around 2.05 cents. While Chase enables Reserve cardholders to redeem these Ultimate Rewards points directly for travel credits at 1.50 cents per point on its travel portal (and Preferred cardholders at 1.25), we think that they are worth much more than that when transferred to, and redeemed through, a partner like Hyatt, United or Singapore Airlines.

60,000 Chase Ultimate Rewards points transferred to Hyatt, for example, will get you 2 nights at the Park Hyatt Vendome in Paris or the Park Hyatt in New York (50,000 will get you two nights at the Churchill in London). Redeemed in this way, the 60,000 points achieve more than 2.05 cents in value and dramatically more than $468.25.

Where is the $468.25 number coming from? $468.25 is the interest you are going to earn on $75,000 if you were to deposit it in an online bank over the next 3 months at 2.50% (the highest online rate currently available). But, if you use that money to try out Chase’s Sapphire Banking over the next three months, they will give you the 60,000 Sapphire Points. We think that makes good sense. In fact, it makes sense even if the $75,000 is sitting idly in Chase for the next three months.

You can sign up for Chase’s Sapphire Banking directly on Chase’s website, but to receive the 60,000 points you need to be a current holder in good standing of either the Sapphire Reserve or Sapphire Preferred cards. It is also possible that, unlike with the sign-up bonuses for those cards, you will receive a 1099 for the 60,000 Ultimate Rewards points, as in this case the points are an interest alternative and not necessarily tax free as they have been ruled as a reward for credit card spend. But, even if you receive a 1099, the value is still there (the $468.25 that you are foregoing would also be fully taxable on a 1099).

This marks the first time since 2013 when it has made any sense for depositors to consider something other than cash interest for their savings.

Check online savings rates here.

One of the most amazing things over the last years has been the huge difference between interest that could be earned from savings and CDs in online banks as compared with that earned at the major brick-and-mortar banks (Chase, Bank of America, Wells Fargo and Citibank to name a few). Equally amazing has been the fact that few in the mainstream media have noted this difference. Still more incredible, until recently, even the online banks have been somewhat reluctant to aggressively highlight the fact that the major money center banks are still giving the public 0.01% or 0.06%.

Online sites, such as BestCashCow and RatesAndInfo.com, have, of course, religiously listed the online banking rates, but even they have been relatively unable to generate much excitement about earning larger returns on your cash in online banks as other assets (equities) have appreciated much more quickly. (These sites also cover brick-and-mortar rates and since some of the smaller banks are competitive, there is a hesitancy to paint all brick-and-mortar banks with the same brush).

But, even as rates are rising, some people are simply unwilling to make the effort to move their money away for the major money center banks. The most amazing thing about all this is that the far better income earned online is absolutely as safe and as protected by FDIC insurance as interest at brick-and-mortar places. There is, in other words, absolutely no reason whatsoever, for one to park cash in anything other than the online highest paying banks.

Finally, the online banks, themselves, have realized their incredible competitive advantage and are just beginning to shout about it from the rooftops.

As an example, this morning wrapped around my copy of the New York Times, delivered to my doorstep, was a huge (2x1 foot), slick advertisement by a major online bank announcing:

THE BIGGEST BANK HEIST IN HISTORY IS TAKING PLACE RIGHT UNDER

YOUR NOSE. IT’S PAYBACK TIME.

BANKS HAVE BEEN KEEPING BILLIONS OF DOLLARS OF YOUR INTEREST.

MOVE YOUR MONEY TO AN ONLINE SAVINGS ACCOUNT AND START

GETTING THE INTEREST YOU DESERVE.

So, it’s about time. It’s actually a wake up call to all of us that old habits can make us loose big money.

See the best online rates here. Compare these rates with the local brick-and-mortar rates where you live here.