Darby Direct has added a feature to its 36-month Step-Up CD that allows the customer to make a penalty-free early withdrawal on each anniversary date. The customer will be granted a 10-day grace period during which any or all of the funds may be withdrawn without penalty.
The Step-Up CD was already a hot deal with an average APY of about 4%. The rate grows from 3%, 4% to 5% for the fist, second and third year. Also, the CD allows unlimited deposits of at least $500. Now with this penalty-free early withdrawal feature, it's especially hot. If you take the early withdrawal after the first year, the CD essentially becomes a 3% 1-year CD. If you take the early withdrawal after the second year, it becomes a 3.5% 2-year CD.
Thanks to the readers who mentioned this in the comments and forwarded the notice they received from the bank. Darby Direct has also updated its 36-month CD disclosure. This new feature is described at the end of the disclosure.
Refer to my August 15th post for more details about this CD offer and Darby Direct.
Unfortanetly, the offer is only available to existing Darby Direct customers and Georgia residents.
Another downside is that Darby Bank & Trust Co. (the owner of Darby Direct) isn't in the best financial shape: 1 star (lowest) at Bankrate.com and 3 stars (adequate) at BauerFinancial. Both ratings are based on 3/31/09 financial data. Darby Bank & Trust Co. is a FDIC member (FDIC Certificate # 14580) so if you keep under the FDIC limit, there is no risk to your principal and accrued interest. The only risk would be if the bank fails during the CD term, the CD could be terminated early or the CD rate could be reduced. If interest rates go up in the next year or two, this no longer becomes a risk.
Other Competitive Certificate of Deposit Rates