Marcus has increased their 11-month No-Penalty CD from 3.80% APY to 4.00% APY. I’m using that as a replacement for a conventional high yield savings account.
Background
Not long ago, Marcus ran a nice transfer promo to get a bonus of $1,500 when depositing $100,000. There were other promo tiers as well.
After the promo period ended, I intended to transfer the funds back to a brokerage and buy the SGOV ETF since that pays a high interest rate and the interest is mostly exempt from state taxes as well since the fund mostly buys U.S. Treasury bills.
However, after comparing rates, I noticed that the Marcus No Penalty CD would get me a similar yield to SGOV:
- the regular high yield savings account from Marcus was only earning 3.40%
- SGOV yield is tied to treasuries, and has been around 3.57% lately
- Marcus no-penalty CD was offering 3.80% (rate has since increased, see below)
The extra .20% from Marcus is about the same as the state tax savings for me. Those with high city/state taxes or in high tax brackets might do the math differently.
The beauty of a no-penalty CD is that it’s pretty similar to a savings account – provided that you don’t need to move money in and out. In my case, it’s cash I don’t expect to need soon, and so I don’t mind it ‘locking it’ in a no-penalty CD.
Rate Increase
When updating our Best High Yield Savings Accounts post, I was pleasantly surprised to learn that Marcus has increased the 11-month No Penalty CD to 4.00%.
And so I closed out the current 3.80% no-penalty CD and had the funds transferred to my regular Marcus online savings account.
Included in the transfer is all of the daily interest since July 1st. Interest compounds daily and is paid out monthly on the last day of the month. When you close out the CD, they immediately add the interest in the transfer.
All of the funds are instantly available in the savings account, and I was then able to immediately open a 4.00% 11-month no-penalty CD.
Wrap Up
For now, this 4% rate is more than I’d earn with SGOV, even after accounting for the tax advantage of SGOV.
There is a simplicity in having a product which goes up and down with the market like SGOV. And you can move funds in and out at will.
But the no-penalty CD has the advantage of a lock-in rate in the event rates go down. And for most people, it also currently has a better yield (unless you have very high city/state taxes).
There are other banks with regular savings accounts that earn 4% as well, and even a couple banks that earn more. I found it easier to leave the funds at Marcus and get the rate lock.
Referral Offer
I’m briefly opening the Marcus referral thread to allow new people a chance at those referrals. Do not leave your referral again if it’s already there. The referral offer is only for the Marcus online savings account (currently at 3.4%). If I were opening a new Marcus account, I’d probably start for the first 3 months with cash in the savings account with the 1% boost (4.4%), and then see if there’s a good no-penalty rate to move to after the 3 months are up.
Just one cautionary note: myself and many readers have experienced Marcus being overcautious with outbound transfers initiated from within Marcus. And so keep that in mind before using Marcus savings or CDs to hold larges amounts of funds. Depending how much and how quickly you move funds around it could make sense to use a different bank instead.
