Bank of America Increases CD Early Withdrawal Penalties
Bank of America CDs used to have an early withdrawal penalty of between 90 days to 365 days of interest of the amount of principal withdrawn (depending on the term). According to this LA Times article, the penalty has increased:
Now BofA is charging a flat $25 plus 1% of the amount withdrawn for CDs with terms under 12 months and 3% for longer terms.
A BofA spokesman was quoted in the article about the reasons for this change. Here's an interesting one:
Don Vecchiarello, a BofA spokesman, said the new early-withdrawal policy for CDs was intended to simplify things for customers. Many people, he said, had trouble calculating a penalty of 90 days worth of interest from an annual percentage yield.
So if you open a $10K 3-year CD which has a 1.00% APY (according to BofA's website on 5/6/11) and then closed it early, the penalty would be $325. That's more than all of the interest that the CD could earn if left to maturity.
No Change to Existing CDs
One thing not mentioned in the article is how this affects existing CDs. I called Bank of America, and I was told this only affects new CDs or CDs that have matured. That's one small bit of good news. As I reported in March, there have been cases at other institutions in which the changes did affect existing CDs.
When your CD matures at any bank and you're deciding on whether to let it renew, be sure to not only check the new interest rate but also the new terms of the CD, especially the early withdrawal penalty.
Thanks to the reader who emailed me news of this article.
Banks Mentioned in this Post:
|Bank of America|
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