What Happened to the Add-On Certificates of Deposit?

Add-On CDs allow you to make additional deposits during the term of the CD. This has been a nice feature for depositors in the last two years as interest rates have continued to fall. They may have been too nice. A few banks and credit unions that have offered these in the past have either stopped offering them or have slashed rates.

The add-on CD is especially useful during times of falling rates. When your CDs mature and if you can't find any new CDs with decent rates, you can always fall back on an add-on CD. Instead of opening a new CD, you just make an additional deposit into the add-on CD. Typically, both the term and the interest rate will remain the same as you make additional deposits.

Some banks put limitations on their add-on CDs. For example, Choice Financial limits add-on deposits to no more than the amount of the initial deposit. Amboy Direct only allows additional deposits for the first 6 months of the 12-month CD. The length of the term can be considered a limitation. The add-on feature becomes less useful for shorter terms.

You might think that in today's low rate environment there is no need for an add-on CD since rates will soon be rising. I hope that's right, but it's quite possible that this low-rate environment will continue for years. An add-on CD with a small deposit can provide a hedge against rates continuing to fall.

Unfortunately, our add-on CD choices have gone down hill. Here are some that are still available nationwide with rates as of 7/8/2010:

• 1.10% APY 12-month eSavings Time Deposit at Amboy Direct
• 1.46% APY 2-year & 1.00% APY 1-year Add-On Certificate at Northwest FCU
• 1.15% APY 12-month Flex CD at Wilshire State Bank
• 1.45% APY 13-Month Rate Builder CD (add-on only to initial deposit) at Choice Financial
• 1.69% APY 18-Month Grow with Us CD at First Savings Bank Northwest

Here are a couple add-on CDs that are limited to local areas of the country:

• 1.50% APY 15-month Add-On Share Certificate (30-mo CD ended) at SchoolsFirst FCU in Southern California
• 2.75% APY 60-month Dedicated Savings CD at America First CU in UT and NV

I remember a few popular add-on CDs in the last couple of years including those from Darby Direct and America's Credit Union. There have also been issues with banks and credit unions reneging on the add-on feature. This almost happened at Darby Direct.

Do you have any great add-on CD deals that you are making good use of today? Or do you know of any add-on CD deals that are still available that I missed?