That’s right!  No more CDs for me for the rest of 2008, and in all likelihood, for the first half of 2009.

I’ve officially stopped contributing to my CD ladder (staggered every 3 months) or searching for those hard to find profits I might get by locking up my cash.  For me, having immediate access to my money is far more attractive than an extra 1% increase in interest rates when so many bargains are available right now.

Not to mention, an increasing number of banks are substantially boosting their savings account interest rates to the 5%+ range.  Particularly interesting is the increasing number of brick & mortar banks boosting their savings rates which currently have better rates than long time favorites ING Direct, FNBO Direct, and ETRADE.

Why I’m avoiding CDs?

See, I’m one of those weird people known for their cautious optimism.  Basically, it means I’m always on the lookout for a good opportunity, but I’m always prepared to say “The Sky is Falling” [sarcasm intended].

Here is my reasoning:

1. Saving rates are going up.  The Federal Reserve will be hard pressed to lower rates any further than they are right now.  If I had to guess, they will increase rates in the next 12 months to help fight inflation.  If this happens, banks could increase their CD rates while I would be locked in at a lower rate.  Something I’m not willing to accept.
2. Banks want your money.  As mentioned, local banks are cash hungry, but need enticements to lure online bankers (people like me) away from the more popular online banks (ING Direct and ETRADE).  I’ve found savings rates as high as 6% to 7% from brick & mortar banks using CheckingFinder.com, which searches banks in their database for the highest rates within your geographic area.
3. The U.S. Government is converting to selective Socialism.  Fannie Mae and Freddie Mac were bailed out on Sunday because they were “too large to fail”.  When taxpayers pay the burden for failed corporate enterprises, that isn’t capitalism!  Regardless, many people on Wall Street have suggested the “notion” that a bottom to the financial crisis has been found and banks can begin lending money again to help their balance sheets.
4. Higher risk savings accounts are still FDIC insured.  Some financial pundits argue that banks who are in financial trouble are offering higher rates because they need cash to keep their doors open.  However, as long as you have less than $100,000 in these accounts, you are still insured and will not lose your money.  If you fear your high savings rate account is in jeopardy for whatever reason, just spread your account over 2 to 3 different high yielding accounts to reduce your risk of dealing with a FDIC takeover.
5. Wall Street is looking very cheap right now.  I’m not suggesting you buy mass quantities of an index fund (or any index fund for that matter), but now is a good time to dollar cost average yourself back into the market if you have been sitting on the sidelines.

Given all this information, one has to ask…

Why would you lock up your cash in a CD when you can get the higher interest rates in a plain-Jane savings account for the foreseeable future?

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