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Ken Tumin founded the Bank Deals Blog in 2005 and has been passionately covering the best deposit deals ever since. He is frequently referenced by The New York Times, The Wall Street Journal, and other publications as a top expert, but he is first and foremost a fellow deal seeker and member of the wonderful community of savers that frequents DepositAccounts.

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Long Distance Travel for Trip-Worthy Bank CDs

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Several readers through out the years have described to me the long trips they have made to open a bank account that's a hot deal. Some have flown across the nation to open the account. The banks offering these accounts are the ones that require a branch visit, but they do not require new customers to be local residents. They don't care what state you reside in.

The bank account that gets the most attention is the CD. Unlike a savings account or reward checking account, the CD provides a guaranteed rate for the term of the CD (unless the bank fails).

One important issue to consider is that the bank's policies on who is eligible to open an account can often change based on management's decisions. That's why I'm hesitant to put too much faith in what a CSR tells me. The CSR could be wrong, or management may change their policy if they're seeing too much demand. Thus, it's important to verify before you make a long trip that the bank office will open a new account for someone who isn't a local resident, and it's a good idea to also verify this with the bank's management at that branch. Of course, it's also a good idea to verify that the CD rate hasn't fallen. The higher the rate, the greater the chance the rate will soon be falling.

Another issue to consider is the cost of the trip. The cost to drive or fly and to stay in a hotel can quickly eat up the financial benefits of the CD. However, if you make part of the trip a vacation, that can help justify some of the cost.

Poll Question

That leads me to the poll question of the week: What's the longest trip you have made to open a bank account?

For the comments, did the trip turn out to be worthwhile? Were there any complications with opening the account?

Current Example of a Trip-Worthy CD

One specific type of CD that attracts attention is the add-on CD that allows unlimited deposits during the term of the CD. This can make for a useful insurance policy when interest continue to fall. When your other CDs mature, you can always fall back to the add-on CD.

It's rare to find banks offering add-on CDs that don't restrict the amount of add-on deposits. Many restrict add-ons to be no more than the initial deposit. That makes the CD a little better than the average CD, but it's not nearly as useful as those with unlimited add-ons.

There is a potential downside to an add-on CD. The bank may change their add-on policy during the term. The question of whether a bank is allowed to make such a change is controversial. Banks and credit unions have done it in the past. In one example, customers were able to get the policy reversed.

One add-on CD that is still available is at Inter National Bank in Texas. When I first reported on this bank in early October, it was offering a 3.25% APY 5-year CD. The yield has recently fallen to 2.75% APY. However, this is still a good deal since they allow unlimited add-on deposits. Please see my CD review of Inter National Bank for more details.

Inter National Bank requires a branch visit to open an account. However, you don't have to be a local resident. A reader described to me how he made a trip to Texas for this CD. Before leaving he made sure to verify with the branch that they would indeed open the account for an out-of-state customer. He also turned the trip into a mini-vacation which helped justify the cost. Fortunately, he was able to lock in the 3.25% before the yield fell to 2.75%.

One problem with opening an add-on CD at an out-of-state bank is the issue of making additional deposits. In the case of Inter National Bank, you can't make electronic deposits into the CD. Your only choices are to deposit in person, by mail or a transfer from a liquid account that you have with the bank. This is where a savings or checking account can come in handy. By using a bank like Ally you can make an ACH transfer into the savings account. Once in the savings account, you can then make the add-on deposit into the CD. This can also be useful when the CD matures. Most banks make it easy to transfer funds from a matured CD into the checking or savings account at the same bank. This often can be done with just a phone call. Once in the savings account, you can than pull the funds with an ACH transfer from your other bank. This companion savings or checking account can be useful for managing a CD. However, there can be complications. You have to watch out for minimum balance requirements, withdrawal limitations and inactivity fees.

Does the term trip-worthy CD sound familiar? You might remember a similar term that became popular in the 90's.

  Tags: CD rates

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Comments
9 comments.
Comment #1 by Anonymous posted on
Anonymous
Very good post. I have made long trips in order to open up CDs twice now (in both cases, Add-on CDs). I have considered them worth it because for one reason or another the bulk of my savings always matures at the same time. If you only have $1000 it's probably not worth it to make a long trip for CD rates, but if you have a good amount, I feel it is -- especially if you can find a cheap ticket and make a mini vacation out of it. If the distance is drivable (even up to 10-12 hours each way) just get a motel room overnight. If it's further (as it was in both my cases), I looked online for a cheap air tickets, and made a mini vacation out of it.

Flying from the west coast to the east coast for the first time, I did a cheap red-eye overnight, arrived in the morning, opened the CD, and then had the rest of the day (until the evening) to look around a nice city I had never seen before (taking a backpack with food so I didn't even have to buy food). For this most recent time I found a cheap flight online from an alternate nearby airport, reserved a rental car at the airport for under $20/day INCLUDING the taxes (if you go the end of the week like Thurs or Friday, many rental car companies will charge the cheaper "weekend" rate). I could have flown back the same evening, but then realized that for around $80 more ($35 for cheap Motel with online discount, $20 for another car rental day, $11 more for an additional day of airport parking at home, and gas money) I could take a second day and drive around the area. I did so, and enjoyed it immensely, going to two different national parks and monuments I had never been to before (like before, I took a backpack of food so I didn't even have to buy food).

If planning such a trip, try using websites like Expedia, Travelocity, etc to look for cheap tickets. There are websites like "retailmenot.com" to find discounts off motels (for instance, if you google "retailmenot" and "motel 6" you'll see a code to give you a nice discount off any Motel 6 room you book online), and as I mentioned above, if you arrive the end of the week, many car companies will have very cheap rates on Friday and often Thurs too, if you book online and the demand happens to be low. In the end though, you have to do the math and see if it's worth it for you.

SOME THINGS TO CONSIDER:

(a) how much you have to deposit. The larger it is, the more it makes sense to do this. (b) the health of the bank and if they'll be around for a while (though I've taken a chance myself, and still though it was worth it). (c) VERIFY more than once (and get their names) that they will allow out-of-towners to come in and open an account. If you get a bank's call center, it's then best to also CALL THE LOCAL BRANCH you'll be visiting and either speak to the manager, or get the name of the person at the actual branch you'll be visiting. I also recommend calling at least ONE OTHER branch, and ask the same questions to verify that what you've been told is correct (and get the name of who you talk to at each branch). (d) Before you go, be prepared with the address and directions of other branches of the bank nearby to visit just in case there's a problem at the branch you go to. (e) Take food with you to help cut costs (lots of peanut butter & jam sandwiches, fruit, things that don't spoil, etc). (f) Since it'd be hard to make additional trips later on, think about what you need to have done while you're there before you leave. If it's an add-on CD and the bank doesn't allow you to ACH funds to your CD, then perhaps open up a savings account (where you can ACH into, and later transfer to your CD) while you're there, etc. -- and have the additional funds to do so. (g) Verify (again, with the branch you'll actually be visiting) what documents you'll need with you (IDs? Paystubs? Names and SSN#s of your PODs and beneficiaries? etc) so there won't be a problem when you arrive and you have everything you need. And for me, (h) research the area around where the bank is before you go, and try to find nice things to see in its general area, so you actually get something out of it. That way you can enjoy your visit a little as well, and it really does make it memorable, not just doing "bank business. I hope this helps!

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Comment #2 by Anonymous posted on
Anonymous
Just a PS to the long post I just wrote above (#1): when I've called a bank to ask if they'll give people accounts who live out of the area, I don't phrase it as saying "Hey, I'm an out-of-towner." Instead, I'll say something like "you know, I don't live in town... but I wind up coming into the area a few times a year, and was wondering if I can open an account at your bank..." It sounds better that way. I make it clear that I live in (my state) but say something like "I'll be in town again next week. Even though I live in (my state), is it OK to open an account with you?" It just sounds nicer that way than saying "hey, I'm an out-of-towner, can I open an account?" :)

 

11
Comment #3 by Anonymous posted on
Anonymous
I agree with #1/#2. In the past I have had much better success opening an account locally if I have (or pretend to have) some connection to the area that will bring me there regularly - i.e. family in the area, business contacts, etc. One time I was able to open an account 1000 miles away from home by stating (truthfully) that my company had an office in the city and I would be visiting it occasionally.

3
Comment #4 by Anonymous posted on
Anonymous
I live in Illinois.  I have traveled to Wisconsin, Indiana and Minnesota to obtain higher rates than Illinois banks were paying.  Frankly, it was ridiculous that I had to travel to these banks in 2010 to open accounts.  The banks  say they require a branch visit to confirm the identity of the depositor and to reduce the chances of money laundering.  This is crazy.  I have long term relationships with Chicago banks that would tell the out of state banks that I am legit and not laundering money.  The Chicago banks can notarize my documents for the out of state banks.  These rules are bogus.  I can purchase a summer home in another state without ever setting foot in that state.  I can purchase shares of Honda or Toyota (through Fidelity) without ever leaving my house.  Why can't a bank in Madison Wisconsin, take my Chicago check in the mail?

2
Comment #5 by lou posted on
lou
I have driven approximately 4 hours from my house to open an iRA account. I have never had to fly to some location to open an account. I hope this doesn't become the norm; it could get very expensive.

2
Comment #6 by Anonymous posted on
Anonymous
Great thread!  And I thought I was the only one...

3
Comment #7 by Anonymous posted on
Anonymous
I was wondering wouldn't the expenses involved be tax deductible?  Afterall, aren't they business expenses?

3
Comment #8 by Anonymous posted on
Anonymous
@#4 "Why can't a bank in Madison Wisconsin, take my Chicago check in the mail?"  The short answer is 'The Patriot Act'. See: http://en.wikipedia.org/wiki/Terrorist_financing and Google 'Hawala' for more info. 

2
Comment #9 by lou posted on
lou
To #7 I think it would be considered an investment-related expense, subject to the the 2% of adjusted gross income threshold, and if you exceed the threshold reported on Schedule A.

2