Jump online for better interest rates

Ask NJMoneyHelp

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Q. I recently received a solicitation in the mail for a 1.5 percent one-year Certificate of Deposit, which is higher than any current savings account. The offer is only good by using the established brick-and-mortar bank’s “online division.” Can you help me with the pros and cons of this sort of arrangement?
— Seeking interest

A. If you’re used to banking in person and not doing any financial transactions online, it may be time to consider making a change.

Online banks and brick-and-mortar banks for the most part work the same.

Before you jump into any CD, remember that they’re not liquid. Be sure you won’t need the money before the term is up. If you’re not sure, a money market fund is a better way to go.

Investing your short-term cash is always a challenge in this low interest rate environment, said Jerry Lynch, a certified financial planner with JFL Total Wealth Management in Boonton.

“Even through 1.5 percent is a great CD rate for now, the reality is that on an after-tax, after-inflation basis, you are guaranteed a negative rate of return,” Lynch said.

He advises you to see how much you need liquid and available in the short term, and then make sure the rest is invested for a reasonable rate of return because you need to grow your money and outpace inflation.

If you decide to go with the online division of this bank, just make sure your funds are FDIC-insured.

And search around before you sign on. Sites like BankRate.com will show you the best interest rate offers for CDs and money markets. We took a quick look and found some money markets paying 1.35 and 1.4 percent right now, several one-year CDs paying 1.5 percent and even one for 1.65 percent. These were all online-only institutions.

And finally, you may have to agree to receive online statements rather than paper, but these can always be downloaded and printed if you find it necessary.

Email your questions to moc.p1508331000leHye1508331000noMJN1508331000@ksA1508331000.

NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.