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CDs may not be best investment for your money

March 29, 2010 12:00:00 AM PDT
Consumer Specialist Ric Romero says there may be a better place for your money than CDs, and there is one thing you should be aware of.We used to see plenty of ads offering three, four and even five percent on certificates of deposit at your local bank, but not anymore. That's because rates are now below one per cent, and that's not much of an investment especially for seniors and those looking for a safe investment.

"Shocking, it's all been taken away from me and I'm deeply upset. I was used to getting that income, counting on it," said Van Nuys resident Regina Bell.

Bell is like many conservative investors. She put her money in the bank thinking she would get enough of a return on her investment to retire without worry. But at .15 in interest, she's in trouble.

"It's not even a certificate of deposit. It's a certificate of depreciation to me," said Brian Gilder, a certified financial planner.

Gilder has been advising Regina now that her investments need help. He says the banks are not always looking out for the customer especially at renewal time for the CD.

"They get a notice in the mail, and it says the CD is about to renew and the key is it says, 'Dear valued customer,' which is saying you're a valued customer and many seniors think 'Oh, I'm a valued customer and they're going to renew me at the highest rate possible,' which is really not the case," said Gilder.

Or worse, the bank automatically renews the CD if the customer has not responded within seven to 10 days and then they're stuck for months. This is what happened to Regina.

"I was relaxed thinking I don't have to worry about that, but it's just the opposite," she said.

So what choice do you have? Gilder suggests the following:

  • National municipal bonds that invest in other states, not just near bankrupt California
  • Ginnie Mae funds have a higher rate of return and are fairly liquid
  • Buy a liquid CD so you can take out the money when rates go back up
  • Pay off credit card debt especially those with a high interest rate
  • Watch out for scams offering high rates of return

"The problem is that money could be who knows where. It can be invested off shore, or it's invested in a type of product where you can't have liquid for 10 to 15 years. So you got to be careful," Gilder said.

If you prefer to keep your money in the bank, then take a trip down to the branch, don't call. When you get there, talk to an investment advisor and tell them you want a higher rate of return on your investment. Also, let them know you have other places you can put your money. Chances are, they don't want to lose your business.