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GMAC Bank's Long Term CD Rates Up - Interest Rate Increase Expectations?

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GMAC Bank is another bank that has recently increased its long term CD rates. The yield is up to 4.35% APY for both the 4 and 5-year terms. All of the rate changes are shown below:

GMAC Bank CD rate changes as of 4/25/08:

Term OLD APY NEW APY CHANGE
3 months 3.50% 3.50% 0
6 months 3.60% 3.60% 0
9 months 3.60% 3.60% 0
12 months 3.90% 3.90% 0
18 months 3.60% 3.70% +0.10
2 years 3.75% 3.80% +0.05
3 years 4.00% 4.00% 0
4 years 4.00% 4.35% +0.35
5 years 4.15% 4.35% +0.20

GMAC Bank's FAQ page does a pretty good job describing the CD details. Some things to note include:
  • Minimum deposit is $500
  • CD can be opened online or by phone
  • CD can be funded by ACH electronic funds transfer or by check
  • If funded by check, rate does not lock until check is received
  • Early withdrawal penalty is 180 days of interest for terms over one year, 90 days of interest for shorter terms
  • 10 day grace period at maturity in which you can close CD without penalties
  • Interest can be posted monthly, quarterly, semi-annually or annually

I opened a GMAC CD in 2006, and I was pleased with both the opening and closing process. I used my GMAC money market account to fund it, and I was able to do this in their online application. When the CD matured, I was able to send them instructions to close the CD and transfer it back into the money market account via their online secure message system. I don't think the online application allowed you to specify multiple POD beneficiaries, but you can send instructions to GMAC to add this to the account.

GMAC Bank does not offer IRA accounts, but they do allow custodial and other legally titled accounts. The online application instructs you to call for assistance for these.

Rate Increase Expectations

GMAC is not the only bank raising long-term rates. In the last couple of weeks I've also noticed several other banks increasing their long term CD rates. This could be an indication that they expect rate increases in the future. As I mentioned before, inflation could soon force rates to rise. So keep this in mind for long term CDs. Make sure you are aware of the early withdrawal penalties. The average is 6 months of interest, but I've seen them as much as 30 months.

Latest GMAC News

There have been more GMAC news stories and their troubles in this mortgage crisis. GMAC's credit rating was just cut by S&P from B-plus to B. Two weeks ago I reported on a potential problem GMAC Bank will have later this year due to a deal that was worked out between GMAC, Cerberus and the FDIC.

As I recommend with any bank, it's wise to stay under the FDIC limits. Even with the latest news, GMAC Bank appears to have solid financial numbers: 4 out of 5 star rating (sound) at Bankrate.com based on 12/31/07 data and a 4 out of 5 star rating (excellent) at BauerFinancial based on 12/31/07 data. More financial details on GMAC Bank can be viewed at this FDIC page.

Thanks to the reader shrazzy who noted this CD rate increses in the finding-the-best-deals post.
  Tags: CD rates

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Comments
6 comments.
Comment #1 by larkin (anonymous) posted on
larkin
The bankrate.com rating for GMAC is 3 stars. I noticed the drop a couple of weeks ago.

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Comment #2 by larkin (anonymous) posted on
larkin
I just followed the link and they do have 4 stars yet there are only three in the rate comparison charts.

Hmmm.

1
Comment #3 by Banking Guy (anonymous) posted on
Banking Guy
I think I remember a past case where Bankrate had a similar inconsistency. I just emailed their quality control about this. I'll let you know what they say.

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Comment #4 by Bozo (anonymous) posted on
Bozo
To: All
Re: Rate increases

Well, bond traders certainly think rates are going up. Look at the dollar versus the euro these past several days. It's not rocket science. Best not to go too long in CDs until you can get over 5% again.

I'm not going any longer than 12 months at this point. Everything I have longer than that is over 5% in any event.

Prudence, prudence.

Yours,

Bozo

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Comment #5 by Bozo (anonymous) posted on
Bozo
PS: Stated another way

Ladder, ladder, ladder. Stuff goes up, stuff goes down. Don't try to time the market, it never works.

If you can AVERAGE a yield over 5%, you are in fine shape. Take out 4%, make 5%, leave a bunch to your kids.

Yours,

Bozo

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Comment #6 by Anonymous posted on
Anonymous
GMAC News Update

http://www.bloomberg.com/apps/news?pid=email_en&refer=home&sid=arMW36jHxP0Q

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