Last Sunday was Bank of Internet USA's 10-year anniversary. The bank was established on July 4, 2000, and it's one of the oldest pure internet banks (1 month older than ING Direct). I did my first review of BofI 4 years ago when the San Diego newspaper did a story on the bank.
It's ironic that the one of the oldest internet banks still does not have an ACH bank-to-bank transfer service. When I called today, the CSR said they're working on the ACH service, and they may have it ready by the end of the year. I'm not holding my breath.
Last year the savings and money market rates were very competitive, but that changed last May when they slashed rates. Their High Yield Savings Account has a rate of 0.90% APY as of 7/6/2010. Their other savings and money market accounts have even lower rates. As a comparison, ING Direct's Orange Savings account rate is currently 1.10% APY, and ING Direct has never been known as an internet bank rate leader.
Even though their savings account rates are low, they continue to have competitive CD rates. In addition, Bank of Internet offers some features that are not common for internet banks. So I thought it would be useful to do a quick review of their CDs.
Below are the BofI's noteworthy CD rates as of 7/06/2010:
- 1.54% APY 12 to 23 months, 6-month penalty
- 2.00% APY 24 to 35 months, 12-month penalty
- 2.42% APY 36 to 47 months, 18-month penalty
- 2.92% APY 48 to 59 months, 24-month penalty
Note, I also included the early withdrawal penalties for each term as described in their Truth in Savings Disclosure. One reason I did this was to show that when considering the early withdrawal penalties, only the 1-year CD is a good deal. For 1-year CDs, 3-month early withdrawal penalties are more common, but 6-months is also fairly common. However, 6-months is also common for terms up to 5 years, so the penalties for BofI's long-term CDs are harsh.
Below is a list of the important CD features. I've highlighted the ones that are somewhat unique for internet banks. These come from Bank of Internet's CD page, from their disclosure page and from my discussion with the CSR:
- $1,000 minimum to open
- Compounds daily
- In the application you can select to have interest added back into the CD or paid out monthly to an outside bank via ACH
- Interest rate is based on the day BofI receives the application. This rate is reserved for 10 calendar days to allow time for your deposit to be received by BofI
- Funding options include mailing a check, wire transfer or ACH transfer. For the ACH, they must first receive a signed written agreement from your before they can initiate the ACH transfer so the check or wire transfer would be quicker.
- Multiple beneficiaries can be included in the application, and you can select ownership designation as POD, ITF or ATF.
- You can select the following types of accounts in the application: Joint, Trust, Non-Profit Corp. and UTMA
- No IRA accounts available
- Grace period is 10 days
- Forfeit interest earned during grace period if you close the CD
- If you do not renew the CD, they can mail you a check for free, wire transfer the money ($30 fee) or transfer it to your BofI checking or savings account.
One positive thing to note about BofI is that it has a long history of top ratings for safety and soundness, and these top ratings continue: 5 stars (superior) at BauerFinancial, 4 stars (sound) at Bankrate.com and an overall health score of 4 out of 5 at DepositAccounts.com (see our Bank of Internet financial overview). These ratings are based on 3/31/10 data except for Bankrate which is based on 12/31/09 data. The bank has been a FDIC member since 2000 (FDIC Certificate # 35546).
Other Competitive Certificate of Deposit Rates
Two credit unions with easy membership continue to offer the best 1-year CD rates. These are Melrose Credit Union and Alliant Credit Union. There are also a few banks offering higher rates on terms of 14 and 15 months. For a list of these rates, please refer to my weekly summary and to the CD rates section of DepositAccounts.com.