Dedicated to Deposits: Deals, Data, and Discussion

4.50% 48-Month Online CD at Flagstar Bank


Flagstar Bank
Update 2/05/09: The 4-year CD rate has fallen to 4.01% APY. Please check the bank's website for the latest rates.

Flagstar Bank is offering a competitive Online CD with a yield of 4.50% APY for a 48-month term. Minimum deposit is $500. There's an online application that allows ACH funding the CD from your checking or savings account at another institution. The 4.50% APY is listed in CD rate table as of 1/02/2009 for zip codes in TX, CA, FL and NY. The APY is only 4.24% for zip codes in Flagstar's market area (GA, MI and IN).

On top of the rate table, there are three tabs. The right one is the disclosure for the CD. At the bottom of this page is a link to the PDF of the full disclosure. Some of the important details from the disclosure include:
  • Automatic monthly or annual transfer of CD interest to a Flagstar account. CSR said that mailing a check is also an option.
  • At maturity you can elect to withdraw the funds via a wire transfer ($20 fee) or by check
  • 10 calendar day grace period at maturity
  • Early withdrawal penalty is 180 days of interest for terms from 12 to 29 months. For 30 months and above, the early withdrawal penalty is at least 180 days of interest. This can be more based on what they call the mark to market penalty which seems quite convoluted.
Note the early withdrawal penalty for long-term CDs. The penalty may be what they call a mark to market penalty which can be more than 180 days of interest. The disclosure provides a general overview of this penalty, and it's not clear how much it'll be. It seems like it'll be more if rates are higher at the time of the early withdrawal.

A reader in my previous post commented that Flagstar does not allow an online IRA. If you want to set up an IRA CD, you must go into a branch. An IRA cannot be set up via phone or mail, only a branch visit.

Flagstar is also advertising a special 24-month Rising Rate CD. It starts out with an interst rate of 3.00% for the first 6 months, and the rate goes up at each 6-month interval to 3.50%, 4.00% and 4.50%. The composite APY is 3.68%. The nice feature is that withdrawals can be made at the end of each six-month interval without penalty. The downside is that it requires an active checking account. Here's what's in the small print:
Customers must maintain their primary checking account at Flagstar Bank and conduct an average of 15 monthly transactions or at least $250 in recurring ACH transactions per month to qualify for the Loyalty Checking account rate.

The offer is only available at Flagstar's banking centers.

Another one of Flagstar's specials is a $100 checking account bonus (see post).

For those who open this CD, you may want to also open Flagstar's online Express Money Market Account. The yield is currently 3.55% APY on all balances with no minimum balance fees. It also has free checks for life. One downside is a low limit on the amount you can transfer via their ACH system (see post).

Flagstar has been hit hard by the mortgage problems. Detroit Free Press just reported that Flagstar has received preliminary approval to obtain $266 million from the fed's $700-billion bailout program. But it's dependent on Flagstar receiving $250 million from a private equity firm. As I recommend with any bank, make sure to stay under the FDIC limits. The bank is a member FDIC (FDIC Certificate # 32541).

  Tags: Flagstar Bank, CD rates

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Comment #1 by Anonymous posted on
I'm looking for any bank company information and I found it on your blog. I'm looking forward to Flagstar Bank and I heard that the money market interest rate is 2.20% APY. I want to learn more on that bank company, during my search I found a website that contains more information of the said company here - Flagstar Bank