It would be unwise to let this WaMu/Chase CD automatically renew. The standard rate of a Chase 12-month CD is only 0.25%, and that is the rate you'll get if you let your CD automatically renew. If you want to stick with Chase, you should try to open one of their CD specials which at least has some reasonable rates. The most competitive is 2.25% APY for a 24-month term. This is listed at Chase's CD rate table as of 7/27/09. The special rates require a Chase checking account, and may also require new money, but you could always try to negotiate (see update at bottom).
As I described when I posted on these CDs last August, the grace period at maturity is 7 calendar days. You'll have to contact Chase at the date of maturity or during the grace period if you want to avoid automatic renewal. (see update at bottom).
On the issue of the best way to receive the CD funds, I've been told different things by multiple CSRs which is likely due to the Chase transition. As a Texas resident, my WaMu online account was transitioned into the Chase system over the weekend. Other states have different schedules. I logged into my Chase account yesterday, and the WaMu CD showed up along side my Chase checking account. So the transition seemed to go fine for me.
My plan to close the WaMu/Chase CD is to call Chase when the CD matures and request that the funds be transferred into my Chase checking account. Then I'll use my Ally savings account to intiate an ACH transfer to pull the funds from Chase. According to a Chase CSR who I called last week, I should be able to call during the grace period and have the CD funds transferred to my Chase checking account. However, I haven't received such confirmations from WaMu CSRs. I spoke with a WaMu CSR from their call center and she wasn't sure if that would be possible. The only two options she gave me to receive the CD funds were to request a check to be sent by mail or request a check at a branch. I called my local WaMu branch, and the local CSR said that I could visit either a WaMu or Chase branch (now that the transition in Texas has occurred) and request a check. She also wasn't sure if I could call and have it transferred into my Chase checking account (see update at bottom).
If you decide to request a check to be mailed, make sure you follow up. I have heard a few cases that occurred at other banks in which the bank did not follow instructions and just let the CD renew.
If have already closed out a WaMu/Chase CD or if you've received instructions from a WaMu/Chase CSR, please leave a comment.
If for some reason you forget to close the CD during the grace period and the CD automatically renews, you'll be liable for an early withdrawal penalty if you want to withdraw the funds. I thought this would be small since these penalties are typically based on what would be earned on 6 months of interest. The amount of interest earned when the rate is only 0.25% is going to be small. However, according to Chase's disclosure, the early withdrawal penalty for a 12-month CD is as follows:
For terms of one year or more, the early withdrawal penalty is equal to $25.00 plus 3% of the amount withdrawn.
And the penalty may eat into the principal:
Early withdrawal penalties may require a reduction in the principal amount if the amount of accrued and unpaid interest on the deposit is less than the penalty.
So if you miss the grace period, and you do an early withdrawal of the entire amount, you'll be hit with a very substantial penalty. For a $10K CD the penalty would be $325.
I'm going to miss that 5% CD. A year ago I didn't think we would be seeing interest rates as low as we have today.
Update 1:24PM PDT 7/27/09: I called again, but this time I was forwarded to the Chase sales department which appears to be the department which handles CDs. If your WaMu account has been converted to a Chase account, I was told that Chase rules apply. Chase rules that are different than WaMu rules include (according to the CSR):
- Chase has a 10-calendar-day grace period which is an improvement over WaMu's 7-day grace period
- I was told that Chase does not accept instructions before maturity. The CSR said that WaMu used to accept instructions before maturity, but Chase requires that you contact them at maturity or during the grace period
Edit 1:24PM PDT 7/27/09: Changed wording of the advice against auto-renewal. Bankers and their attorneys may see the recommendation as bad financial advice ;-)