Dedicated to Deposits: Deals, Data, and Discussion

New Rates Again at Indymac Bank - 4.40% 13-Month CD

POSTED ON BY

Update 7/11/08: FDIC puts Indymac Bank into conservatorship. See post for more details.

I thought we would get some rest on the 4th (Happy 4th of July by the way). But Indymac Bank is still changing rates. I think they may have broken the record for the most rate changes in one week. I just posted on their new rates yesterday, and they came out with new ones today (or late last night). Below is the rate list of their competitive online CDs:

Indymac rates as of 7/04/08 (12:20pm CDT)

CD Term APY
3-month 3.70%
6-month 4.10%
9-month 4.00%
10-month 4.00%
12-month 4.35%
13-month 4.40%
18-month 4.40%
24-month 4.65%
36-month 4.85%

E-Money Market

Tier APY
under $10K 1.35%
$10K - $25K 3.85%
$25K - $50K 3.90%
$50K - $75K 3.95%
over $75K 4.00%

Note, some of the above CDs are specials and require new money. Please refer to my April Indymac post for more details about the CDs and my experience opening and closing an Indymac CD.

Many commenters gave their opinions in my previous post about the wisdom of taking advantage of these CDs considering Indymac's current financial health. Many see this as a great opportunity if you keep under the FDIC limits. You can get a very attractive rate on a long term CD. If Indymac should happen to fail, you'll still get all of your principal and interest. According to the FDIC:
Federal law requires the FDIC to pay 100 percent of the insured deposits up to the federal limit - including principal and interest.

If a new bank assumes the deposits, which is the most common case, the new bank could decide to close the CD without any penalties. If this happens, you effectively had a short term CD with a long-term rate.

However, there are worries about the FDIC and the time it'll take to get your money. According to the FDIC:
federal law requires the FDIC to pay the insured deposits "as soon as possible" after an insured bank fails. Historically, the FDIC pays insured deposits within a few days after a bank closes, usually the next business day. In most cases, the FDIC will provide each depositor with a new account at another insured bank. Or, if arrangements cannot be made with another institution, the FDIC will issue a check to each depositor.

This doesn't say you are guaranteed to get back your money within X number of days, but based on recent history, this has been accurate. Most who went through NeBank's closure last year didn't have any major problems (post). There is a concern that recent history may not be a good guide for the next year which may be a very difficult time for the banking industry.

Here are some of my past posts covering the FDIC:

Update: I just came across this interesting MarketWatch article, "Rate uncertainties, How secure are those high-yield bank interest rates.", which seems quite relevant in regards to Indymac's rates. Here's one quote regarding the time it takes to recover your money.
the longest FDIC employees can remember depositors losing access to their funds was in the 1999 failure of First National Bank of Keystone, in West Virginia. Bank customers waited from Sept. 1 to Sept. 7.

The article also discusses some of the issues related to using revocable trust accounts to increase your FDIC coverage. It says one common issue is when a non-qualified beneficiary is used. I'm surprised it didn't mention anything about improper titles. It did mention one issue that was new to me:
Another problem may occur if your bank fails and you're leaving money to a qualified beneficiary who is a minor. State laws typically prohibit you from leaving $100,000 to a 10-year-old.

The FDIC spokesman said you probably need a guardianship. So it appears there may be FDIC insurance issues when your POD is a minor. If anybody knows more about this issue, please leave a comment.
  Tags: CD rates

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Comments
21 comments.
Comment #1 by Anonymous posted on
Anonymous
Happy Fourth of July, Banking Guy! Thanks for your dedication.

1
Comment #2 by Anonymous posted on
Anonymous
Hi Banking Guy~

Wishing you a Happy 4th of July along with many thanks for all you do for all of us.

You are a national treasure :-)

a dedicated fan.

1
Comment #3 by Anonymous posted on
Anonymous
Banking Guy, I believe you know, but somehow you missed to say that only the principal is insured up to $100.000.00 but not the accumulated interest.

The interest not paid is an issue when a Bank fails, do to the fact that the interest is treated as not binding under FDIC rules. Actually the accumulated interest may be paid from other assets owned by the Bank. In a case where there are no assets left, interest may not be paid by FDIC. There numerous cases from the past to attest to that.

1
Comment #4 by scott (anonymous) posted on
scott
You could request the interest paid to you monthly, I do that on many $100k CDs

1
Comment #5 by Anonymous posted on
Anonymous
Nice rate tiers!!

Glad I never heard back from Wachovia afteR I submitted an online app. I hope they didn't run a hard inquiry however! They wont be getting a cent of my money now.

As for indymac, how does one withdraw a CD if we dont have an indymac branch local once due date is up? I am always afraid to open CD's for accounts that do not have local branches.

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Comment #6 by bharani (anonymous) posted on
bharani
You are doing a great job. Just wanted to wish Happy 4th of July.

1
Comment #7 by Anonymous posted on
Anonymous
Quote: "You could request the interest paid to you monthly, I do that on many $100k CDs"

By scott, at 1:38 PM, July 04, 2008

That is exactly what I do also. That is where my monthly income comes from. And if any bank fails that I have CDs with, the most I will possibly loose is one month's interest from the bank that failed.

1
Comment #8 by Anonymous posted on
Anonymous
it would be a great if your posts had great rates for IRA s

1
Comment #9 by glxpass (anonymous) posted on
glxpass
Banking Guy,

Best wishes for a happy Fourth of July. Your blog is one of my daily must-reads.

Have a great holiday weekend!

- glxpass

1
Comment #10 by bob (anonymous) posted on
bob
I think they actually lowered their 3 year rat from 5.00 to 4.85%.

It seems more anonymous posters contunue to spread misinformation.

Did they READ this part ?

"According to the FDIC:

Federal law requires the FDIC to pay 100 percent of the insured deposits up to the federal limit - including principal and interest."

Theres NO REASON to not let your money accumulate and take monthly interest payments out of fear as long as your balance plus accumulated interest is below $100k.

I do wonder what would happen in the worst case scenario where multiple banks fail around the same time.

I dont want my high rate CD to be thrown into a low paying money market account AND not be able to touch it for months.

We need more banks to "rate match" the way walmart does with competitors weekly ads.

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Comment #11 by scott (anonymous) posted on
scott
I open most CDs for the max FDIC insurance of $100k, So my accumulated interest would exceed $100k, That is why I opt for interest paid monthly on accounts where I am not that comfortable with banks safety. Also many do it because they are using that interest as their income to live on.

1
Comment #12 by Anonymous posted on
Anonymous
You are insured for interest already paid. However you are not insured for unpaid interest(e.g. CD interest paid at maturity). If you are within FDIC limits, then your risk in a bank failure is the lack of access to your funds and the amount of lost interest.

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Comment #13 by Anonymous posted on
Anonymous
I'm not in the same class as some of the posters here who have many 100K cd's but I do have a few small ones. My experience in redeeming some cd'c can best be described as a pain in you know what. That is especialy true with IndyMac and WAMU. I have a question for Banking Guy or anybody who would like to answer. Will banks let you specify when you buy a cd that you want it redeemed on the maturity date and not renewed. I see no benifit to being able to renew a cd since you get current rate at time of renewal. If they let you renew at original rate then it might be worth something. It appears to me the renewal clause is for the bank and not the customer so I don't see why I would want one. Let me know if I am missing something here.

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Comment #14 by Anonymous posted on
Anonymous
About some of Indymac's Special CD rates needing "new money". I called and spoke to a knowledgeable CSR on Thursday, as I have a CD maturing in August and expressed my opinion that requiring "new money" to get the best rate was disrespectful to their current depositors. The CSR assured me that they will give me the "new money" rate. He also said that they will match any competitors rate to keep my CD at Indymac. The lesson is, always ask. The worst case is they say no and you move your money.

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Comment #15 by Anonymous posted on
Anonymous
I have a question not related to CD. Indymac has the following tiered rates for the E-MM account: $1,000-$9,999 1.35%; $10,000-24,999 3.85%; $25,000-$49,999 3.90%, etc. Suppose I maintain $26,000 in the account, how much of it gets 3.90% APY, (a)$26,000 (b)$1,000, or (c)$25,000 (since no interest paid for below $1k)?

1
Comment #16 by Anonymous posted on
Anonymous
(a) The whole balance earns 3.9% as long as your over 25,000.

1
Comment #17 by Anonymous posted on
Anonymous
Just after the stock market closed today (July 7) the following news was released:

- Indymac to cut 3800 jobs
- Indymac to stop accepting new loans
- Indymac can't accept brokered deposits without FDIC waiver
- regulators say Indymac no longer well capitalized (thus the great rates)
- 2Q loss will be bigger than 1Q loss

Still, I would have no qualms opening a new CD with Indymac as long as you stay under FDIC limits.
Getting 4.4% on a 13-month is kind of irresistible.

1
Comment #21 by Boby (anonymous) posted on
Boby
Hello. I find your blog very interesting. I think that everyone had something to do with banks. It is hard to choose a good and reliable one. After so many banks I had to deal with I should say that Indymac Bank is the best one. I learned about it from www.****edconsumer.com. Although the feedbacks about the company were not very positive I still ran a risk and went there.

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