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Dr. Don Taylor, CFA, Bankrate.com advice columnistFinding the best bank promotion offer

Dear Dr. Don,
I'm hearing a lot about cash offers to open new savings or checking accounts. Where do I find these and how do I know I am getting a good deal? Also, my teenage daughter is saving for a car that she plans to buy in June of 2007. Is it best for her to buy CDs now for a few months or keep her money in a savings account? Thanks.
-- Anne Acura

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Dear Anne,
A cash bonus for opening an account trumps getting a new toaster -- unless you need a new toaster.

Bankrate doesn't track promotional offers, but there are sites that do track these offers. The problem is that all of the ones I've seen are a ragtag accumulation of postings and ads that don't let you easily compare offers and terms. I guess I'm a little spoiled by Bankrate's businesslike approach to tracking rates over time.

But if you know of a bank promotion, send it to editors@bankrate.com.

Deciding on whether that's a good deal depends on how the bonus improves the interest rate yield on the investment. I couldn't find an easy-to-use calculator on the Web that would solve for annual percentage yield, or APY, for you given the interest rate and the bonus. With such a short investment horizon, you can safely compare choices by looking at the interest earnings plus the bonus for each different option and be fairly confident that the one with the largest combined earnings, assuming the same initial investment, is best.

Your daughter has an investment horizon of six to eight months. Locking in an interest rate with a short-term CD gives her a guaranteed yield over that time period, but she loses the flexibility of a money market account, or MMA, and may face an interest penalty for early withdrawal if she finds her dream car and has to close on the deal before her CD matures.

While the interest rate paid on a MMA can vary over her investment horizon, the time span is short enough that she's not taking on all that much interest rate risk. She can shop rates on Bankrate.

To ask a question of Dr. Don, go to the "Ask the Experts" page and select one of these topics: "financing a home," "saving & investing" or "money."

Bankrate.com's corrections policy -- Posted: Nov. 13, 2006
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NATIONAL OVERNIGHT AVERAGES
Interest checking 0.49%
MMA 0.40%
$10K MMA 0.36%
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