Now that the Federal Reserve Board lowered the interest rate, it looks like we’re seeing the last of the 5.3% APY savings accounts, which appear to be a dying breed. I personally expect even these to disappear shortly; after all, why offer rates in the 5s when other banks are touting rates in the 4s quite happily?

This makes me sad and nostalgic for the better savings-rate days of yore, but also prods me into taking action.

I was mightily happy with the 6% interest rate I’d enjoyed on my FNBO Direct account up until September 28th of this year, when the company cheerfully announced their plummet to 5.05% APY.

Perhaps you might think me unreasonably happy with the 6% rate. To many readers, it’s not worth the hassle of switching accounts just for some chump change. But I’m one of the aforementioned chumps, you see, and to me, several hundred dollars I don’t have to work for on emergency fund money which was going to sit around anyway is a great thing.

Thinking about the after-tax rate does diminish my pleasure somewhat, but still, every last-day-of-the-month, my brain goes ca-ching when it runs down the roster of interest payments I’ve gotten. I threw the extra $460.34 I earned by keeping those funds in that high-yield savings account for 9 months right at my monstrous student loans, which helped to pay them off.

So today, while listening to my FNBO rep crow about their 5.05% APY on the phone, I took a nice big chunk of emergency fund money and stuck it in the highest-yielding CD I could find, 5.65% at Countrywide.

Countrywide offers the same 5.65% APY on both 6- and 12- month CDs, so before I hit “submit” on the application, I did spend some time playing Nostradamus. Would interest rates rebound by March? By September, leaving my funds off in their little electronic box not earning to their full risk-free potential?

I used the handy-dandy CD interest calculator at bankrate.com, and found that for $10,000 at 5.65% APY, a 6-month CD will pay $278 in interest and a 12-month CD, $565.

In the end, I settled on a 6-month CD for two reasons. Read the rest of this article »

Countrywide, the country’s largest mortgage lender, is stepping in to “rework” 82,000 loans totaling about $16 billion. I believe that the lenders and the borrowers are both partly to blame for the mess. Lenders offer risky loans, and customers, happy to hear they can afford more than they anticipated, sign up without realizing they can’t really afford it.

When a company like Countrywide gives into consumer pressure, you can be sure other lenders will follow. While this is good for the economy in the short-term and good for the borrowers overall, it may send a bad message. It perpetuates the idea that there are no real consequences to being in debt. Bailouts extend the ability for people to survive while simply signing their paycheck over to other people and companies like mortgage lenders, electric and cable companies, and credit card issuers.

This is a dangerous thought: As long as you are following the spending trends of millions of other people, you are safe. There will always be changes in regulations or laws to keep the economy somewhat afloat, and if you’re representative of the greater economy, chances are you’ll be kept afloat as well.

While history shows that in general that has been the case it is a highly dangerous way of thinking, because it doesn’t play out that way for everyone, and you have no idea of knowing if it will for you. It’s a much better idea to live below your means and never have to worry.