FlyerTalk Forums - View Single Post - TD Ameritrade offer for AA miles - targeted
Old Jul 17, 2010 | 10:33 pm
  #22  
LH2004
 
Join Date: Nov 2008
Programs: MTA NYCTA Super Plutonium Elite
Posts: 107
Originally Posted by muji
I know very little about investments and the like. So I don't really want to invest. I just want to deposit some money temporarily (for 9 months) in order to earn Starwood points.

I've gone to the Ameritrade website, but have not yet found the information I am seeking. My question: how can I deposit my money for the 9 months to earn the points I seek - while keeping my money safe? Do they have simple CDs where you put your money in for a specified (9-month) period, then withdraw it after the specified period with your money intact? I will give them a call, but wondered if other FTs who have deposited money simply to earn points or miles could state what route they took. (If such advice should not be given here since it would be considered financial advice, that is fine. I'm just trying to earn points and saw this offer on FT.)
You have several options that are essentially 100% safe:

1. Leave your money uninvested. If you do nothing, it will sit in a sweep account. You probably have a choice when opening your account between an FDIC-insured bank account, an SIPC-insured cash balance with them, or a money market fund, which is not government-insured but in which losing money is very, very rare. (The Reserve money market fund failed, which was the first time that happened in many years; investors eventually got back more than 99% of their money. A big company like TD Ameritrade would be under huge pressure to pay off investors if their fund lost money.) Technically speaking, SIPC does not cover a brokerage cash balance if you didn't intend to use the money for trading, but I doubt SIPC even tries to enforce that.

2. Buy a brokered CD, that is, a CD they sell you from another bank. They have 9-month CD's yielding 0.25%. These are FDIC-insured (but you probably want to watch whether you're buying one from a bank you're already close to the FDIC limit at). You can sell early if you want to, with no penalty but subject to interest rate risk (which is trivial when there's not much time left to maturity). There's no commission -- because it's built in to the yield you get (or the price you get when you sell).

3. Buy a Treasury bill, or a note or bond about to mature. They have plenty to choose from. Yields will be minuscule. There are some maturing every month, so you can find something with exactly the amount of time left you want. These are direct obligations of the U.S. government. Again, you can sell any time; there are plenty of buyers; you could lose money if interest rates have risen, but the risk will be tiny with short periods to maturity. Again, they build commissions into their prices.

4. Buy an "ultrashort bond" ETF, like the one with ticker symbol BIL. This is almost like a money market fund. It will fluctuate by a few cents as interest rates move, but it will be hard to lose more than a tiny amount; again, there's the theoretical risk of losing money on a default, but that is very unlikely. It trades like a stock, so $10 commission to buy and then again to sell.

5. Buy another money market fund they sell. Fees can be a little higher (either a bit in commission, or, on a no-transaction-fee fund, a penalty for selling too soon).

Originally Posted by koroleon
+1. Also, what's the cost to transfer money in and out of Ameritrade? Would a check do the trick (i.e. no transfer costs)?
There are fees if you want money wired, or overnight delivery. They waive the fees if you have "Apex" status ($100,000 of assets with them). If you are willing to deal with ACH transfers or checks with regular mail, there won't be fees.
LH2004 is offline