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Tips and Warnings When Closing a Discover Bank CD

POSTED ON BY

Banks often don't make it easy to close a CD at maturity. They hope you'll let the CD automatically roll over. If you want to close the CD when the CD matures, you sometimes have to jump through hoops. For example, few banks offer the ability to transfer your CD funds via ACH to your account at another bank. This is even the case for some banks that allow you to fund the CD via ACH. You might have to request that the bank mail you a check. A wire transfer may be an option but an out-going wire transfer almost always has a fee. Also, some banks require you to mail or fax them written instructions for closing a CD. This can't be done online or by phone.

Problems Closing a Discover Bank CD

A reader recently emailed me about the hoops that she had to jump through to close a Discover Bank CD at maturity. Not only did she have to jump through hoops, but they charged her a penalty for early closure. On her request, I forwarded her email to my Discover Bank contact, and Discover management looked into this issue. They realized a mistake was made, and mailed her a reimbursement check for the penalty along with an interest adjustment for the lost interest.

The reader said she first called Discover Bank when she received the maturity alert letter. She asked for Discover Bank to mail her a check when it matured. Two days later she followed up, and found out that the CD was scheduled to roll over and not to be closed at maturity. She was told that since her CD balance was over $100K, they required written instructions to close it. She then faxed in the written instructions. When she followed up again, she was shocked to learn that they closed her CD early, and she was charged an early withdrawal penalty. This is when she contacted me, and I helped her get into contact with Discover management.

I'm glad to report this issue is being resolved, and Discover Bank was willing to make things right. However, it does show the complications that can occur when you're trying to close a CD at maturity. There are some important general tips that can be learned from this incident. Also, there are important details about closing a Discover Bank CD especially for those with CD balances over $100K.

General Tips for Closing a Bank CD

The first general tip for any bank is to make sure you follow up with customer service especially if you don't have anything in writing. When you do speak with a customer service representative, try to record the name of the rep and the date and time of the call. Ask for a letter or email confirmation of your instructions. If you don't receive the written confirmation, make sure you follow up with another call. If this reader didn't follow up with the Discover Bank rep, her CD would have automatically renewed. If she found out after the grace period ended, she would be locked into another term.

The second general tip for any bank is to be very careful about specifying when your CD is to be closed. In this Discover Bank case, I don't know how customer service could have assumed she wanted to close the CD early when it was going to mature in just a few weeks. You can't assume the bank will act with common sense. The reader provided the following tip for others when they instruct their bank to close a CD:

for any and all correspondence to include directions that specify "upon maturity" in bold lettering, and to not be reluctant to repeat the instructions, when closing a CD.

Hopefully, Discover Bank will improve their procedures to ensure this problem doesn't happen again. Also, I hope they make it easier for customers to close CDs. For now, the process to close a Discover Bank CD isn't the best especially if the CD has a balance over $100,000.

Instructions for Closing a Discover Bank CD

In my correspondence with Discover management, I obtained several important details about closing a Discover Bank CD. I thought this would be useful to mention for anyone who has a Discover Bank CD or who is considering opening one in the future. As mentioned above, Discover requires a written request to close a CD for amounts over $100,000. A secure message from Discover's account center will not currently satisfy this requirement.

To ensure that you don't miss important information in the request (like when to close), it's wise to ask Discover Bank to send you a closure request form.

If you're sending instructions without a closure request form, be sure to include:

  • The name or names on the account.
  • The account number(s). A good reminder is to note exactly which of the accounts are to be closed. A customer might hold more than one CD that matures on the same date. They may want a payout for one and a roll-over for the other; or some combination of the two.
  • Specific instruction on each account number that is to be closed and the closing date. Some people have more than one account/CD, that they may reference on a call, or that might have the same maturity dates.
  • Clear instructions on what amounts should be sent where. For example, the full balance can be sent out, and/or portions may be distributed among the customer's Discover money market or online savings accounts.
  • If funds will be sent via wire transfer, Discover needs the account number and routing number you want it sent to. If the funds are going to an account that does not belong to the CD holder, they need to make it clear in the letter, and list the third party’s name and banking information.
  • If the customer want funds sent by check, clearly list the address Discover is sending the funds to. It needs to be specified whenever the address is different from the one listed on the account.
  • Ensure that the letter is signed.

When a Discover Bank CD account is closed, there are three options to receive the funds:

  1. Discover can mail the customer a check for the full amount -- or the customer can reinvest some of the money and receive a check for whatever amount she does not re-invest.
  2. For a $20 fee, the customer can receive his funds via a wire transfer through a manual verification process. Discover Bank does not currently use ACH capabilities for such transfers.
  3. Customers with money market or online savings accounts can transfer the funds through or into those accounts. However, these accounts have transfer limits, and customers are only allowed to transfer up to $100,000 every 30 days. So, for example, if my CD matured and I was due $105,000, I could only transfer $100,000 into those accounts and request a check for the rest. The customer would not need written authorization to do that, because it can be done within the security of her account center.

I'm surprised that the $100K transfer limit also applies to an internal transfer. One would think you could transfer the entire Discover CD into your Discover money market account without any dollar limitation.

Final Note

It's a good idea to find out the requirements to close a CD before you open a CD. You don't want to be surprised by requirements when the CD has already matured. Also, the requirements are not always the same for everyone as can be seen with Discover Bank. Requirements can vary based on your balance.


  Tags: Discover Bank, CD rates

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Comments
25 Comments.
Comment #1 by Anonymous posted on
Anonymous
they probably do this to all their customers knowing that many of them will either not notice or have the inclination and/or wherewithal to get their stolen funds returned to them as this lucky customer did

5
Comment #2 by Anonymous posted on
Anonymous
Ken, this is worth keeping in a file for those of us who have Discover CD's.  Would it be possible for your Tech Partner to creat a "print button" that would format these kind of files for easy printing?

4
Comment #3 by Anonymous posted on
Anonymous
The worst requirement for closing I've experience is with US Bank.  They want customer to physically come into the branch and close! 

Avoid US Bank is you're not sure of maeeting this requirement.

7
Comment #4 by Anonymous posted on
Anonymous
Thanks for the heads up! I will never open a CD with Discover Fraud Bank!

5
Comment #5 by Anonymous posted on
Anonymous
Don’t forget EverBank, they held my CD closing funds for 15 days and timed the delivery of the check to come on Friday so it will actually wait few more days at my local bank.
When I ask for explanation, they said their computer system had a glitch and had to do it manually, yah RIIIIGHT!!!

11
Comment #6 by Teacher posted on
Teacher
Discover was the only bank out of many that would not let me close a CD in my mother's living trust upon her death.  Because of them I couldn't completely settle her esate until that CD matured and they did then send a check to her trust.  They sent me in circles for 9 months.  I won't use them any more because I wouldn't want my kids to have to deal with them if anything happened to me.

5
Comment #7 by Teacher posted on
Teacher
Key Direct requires a certified copy of your living trust to close a CD in you trust-even if you are still living.  The copy and certification can only be 1year or less old.  I don't think this was a requirement when I opened the CD.  They daid if they were not satisfied with the copy they would roll the CD over.  This seems totally wrong.  They could keep it going for years.

4
Comment #8 by Anonymous posted on
Anonymous
I have several CD's with Discover, and have never had a problem.  On the maturity date, I just call them and ask them to mail me a check.  I now have a Discover Money Market Acct and they put the proceeds directly into that account. 

2
Comment #9 by Anonymous posted on
Anonymous
Here's another horror story about Discover.  About a year ago I went into my Discover account online and placed an order to transfer $2,000 into Discover from my previously linked Fidelity account by ACH.  Their computer had some sort of systemwide glitch that caused Discover to execute the order twice -- and apparently they did that to everyone nationwide who placed a transfer order during a 24-hour period.  The double transfer out of Fidelity caused another transaction I ordered through Fidelity to bounce.  Luckily I was able to reverse that bounce after explaining the problem with Discover.  Discover needed about 48 hours to correct their nationwide problem and to undo one of the two double transfers for everybody who had been affected.

3
Comment #10 by Anonymous posted on
Anonymous
A while back Discover had an ACH transfer limit of $25,000 for any one event and $35,000 per month.  I wanted to transfer $100,000 from Discover to Fidelity.  I placed the order through Fidelity rather than placing it through Discover, and the transfer was executed just fine.  Ever since then I have always placed ACH transfer orders through the other institution rather than through Discover, whether the money is going to or from Discover.  And apparently the limits on amount of money that are imposed by Discover apply only to using the Discover system but do not limit the amount of money that can be transferred to or from Discover when the order is placed from a different institution.

4
Comment #11 by Anonymous posted on
Anonymous
I have had nothing but good service from Discover so I hope this was just an isolated problem. I would also recommend having some type of liquid account(ie-checking,savings,etc) at banks where you have CD's. It's usually so easy just to call when your CD matures(I do it on the exact day-never before) and have it transferred into your liquid account......then you get the funds usually that day and dont have to worry about a lost check in the mail or the time it takes for the mail.

3
Comment #12 by Anonymous posted on
Anonymous
Funny.....all of you people complaining about Discover.....Yah.....I'm sure it was all Discover's fault and you did absolutely,positively nothing wrong........Yah,right....give me a break!!!

Discover has excellent customer service so I doubt they were the problem.....I'm sure you people were the problem. Sure, Discover could can make mistakes just like anyone.....but I doubt it was them in any of your cases. You probably gave them some complex issue that you just had have resolved in 5 minutes....then when it didn't happen you started crying like little girls and blaming them for all you pathetic problems.

4
Comment #13 by Anonymous posted on
Anonymous
For closing a matured CD account, Incredible bank requires a written request, notorized, sent to the bank.  ACH transfer can only be sent to the bank originally funded  the CD account.  Unfortunately I have already closed that account from the other bank.  My only choice is to ask them to send me a check of the closing balance and hopefully there will not be additional charges.  

1
Comment #14 by Anonymous posted on
Anonymous
I've never done business with Discover Bank and never would.  Think of it as an instinct.  But I agree with #12, regardless:

 

I would never blame Discover for the reported problem without first seeing the woman's letter of instruction.  Too many people today are horrid when it comes to written communications;  their written instructions are too often unclear or incomplete.  Most Americans who could write well are today dead.  What we have remaining is a bunch of verbal communicators.  If they cannot verbalize their (what pass for) thoughts, with the requisite number of "you knows" breathlessly thrown in for good measure, they are unable to communicate at all.

4
Comment #15 by mak1118 posted on
mak1118
I have more then 10 cds always ,I ladder them and can honestly say that I can never remember having a problem closing a cd. I call and find out what I have to do which is usually fax in a request or sometimes I have even done it over the phone. I am sure it is possible for there to be mistakes made because lets face it some of these people you talk to at the banks and the credit unions are incompetent not all of them but I nave dealt with a few. As far as Discovery goes I used to have cds with them years ago when they had some of the highest rates around but their rates have been on the low end for years same with Capital One.

2
Comment #16 by Anonymous posted on
Anonymous
Some people make suboptimal decisions.  A few years back a family member had a choice to cash in a cd with penalty to make a purchase or take money out of a mma savings.  Of course they cashed in the cd because they want to have the mma savings money liquid.  Ouch!

1
Comment #17 by Anonymous posted on
Anonymous
Banks have lots of arcane rules; sometimes they are arbitrary, often they are because of a lot of "gotchas" in regulations that the bank rules are designed to comply with (even though no one but the lawyers understand the reasons).  So the poor bank employees are stuck following them rigidly.  It would be nice if the banks could come up with standardized policies instead of each one having its own rules. 

That said, there's a lot they do that's just plain wrong.  For example, in New York State (unlike most states), Letters Testamentary (court papers authorizing an executor to act on behalf of the estate) are valid for six months.  But banks, virtually without exception, hold to a sixty day limit (the norm in most states).  Most financial institutions, banks or otherwise, have this policy.  Power of Attorney (legal representative)?  I've had banks refuse it, saying that an invalid must come physically to the bank to open/close an account.  Wrong, wrong, wrong.

Have people's ability to communicate clearly and unambiguously declined?  I have no doubt of that.  But that's just as true for the bank reps as for the customers.  I was an estate executor and worked with a number of financial institutions, giving them virtually identical instructions.  Some were terrific, others quite painful (Capital One comes to mind).  Some of that was institutional - the way different financial institutions were set up to handle the process.  Some of it was individual - one could find a great, helpful person at the same place that one found an employee who did nothing but obstruct. 

So I agree in varying degrees with all the responses - there's a clear communications issue.  From anecdotal evidence, it's not clear whether that's an institutional problem with Discover, or even whether Discover or the customer, or both, were not communicating clearly.   The best thing to do is to get the bank's disclosure statement before even opening the account (to know their rules and limitations), to use their forms when conducting business with them, and to include the information enumerated by Ken in his bullet items.

4
Comment #18 by Anonymous posted on
Anonymous
It may be a good idea to return the form banks provide for your instuctions about a maturing cd.( keep a copy)  I had two nightmare experiences closing cd's.  One with Wachovia the check did not arrive for 11/2 months.  Repeated phone calls, letters ect.  The story was " the check is in the mail" First Citizens was another. If the bank doesn't provide a form you can do your own ( above) remember the funny business about weekends. holidays,etc.  Give yourself enough time.

1
Comment #19 by Saver posted on
Saver
Timely article because I have had a problem with two Discover CDs in the past week. 

In the first case, the funds for the Roth IRA were not received by the other bank.  Discover put a stop payment on the check and sent a second check overnight.

While I was communicating with Discover about this CD, I asked them if the funds for the second CD had been sent out yet.  They said that they had not received the paperwork from the other bank.  The ten day maturity period was supposed to expire that day (Memorial Day), but they extended it by an additional day so that the forms could be faxed to them.

I don't know if the responsibility for both mistakes lies with Discover Bank or the other bank, but at least Discover Bank did its best to rectify the problems.  It does pay to be on top of the situation with both institutions to make sure that the paperwork has been sent and received and then ditto for the funds.

1
Comment #20 by Anonymous posted on
Anonymous
Most of the restrictions on closing CDs at any institution are for our protection. One should not be able to do $100K transactions using only phone calls!

2
Comment #21 by Anonymous posted on
Anonymous
I'm in the middle of trying to withdraw two IRAs in excess of $12K from Discover Bank, and they're fighting me every step of the way. The terms on both were up 6/8/12. The rates Discover is offering aren't competitive, and I just want to transfer the money to my other bank, which faxed over the transfer forms on 6/7/12, in my presence. When my other bank tried to follow up concerning when the checks would be sent, Discover told them it would take 6-8 weeks. I called Discover to ask why. They said it would take only 48 hours, but claimed the delay was due to their not receiving the forms. Well, I was at my other bank when the transfer forms were faxed over, and Discover acknowledged receiving them. So I went back to my other bank, to confirm we had the fax receipt, and to fax the forms again, in the event Discover "lost" them. The fax receipt said "OK", which means the transmission was successful. So I called Discover again. We didn't have to fax them again. They had the forms all along. Their next claim was that the forms were not completed correctly. That's not what the woman who received the forms said on 6/7/12 said. She said everything with the forms was fine. My contact info is on top of both forms. If there was a problem with the forms, why did I have to call them to find that out? Why didn't they call me? They made my bank resubmit the forms, but refused to send me any kind of acknowledgement that the delay was their responsibility. I'm anticipating that they are trying to run this out to the point of rolling over the IRAs and assessing me penalties for withdrawal. Otherwise, why wouldn't they send me an acknowledgement? Today, I've been bumping this problem up the chain of command at Discover Bank, from Eric, who answered the phone, to David Sabler, his supervisor, to Kevin Jensen, their manager, who is now trying to convince me, that because of the way my other bank is asking for the transfer to be done, it's going to get me in trouble with the IRS! He's telling me I'm going to be assessed penalties by the IRS!

1
Comment #22 by Zealot (anonymous) posted on
Zealot
Opened three CD's with Discover Bank after talking with a supervisor that assured me that they would waive interest penalties if the we had to close early due to the death of the beneficary of the interest generated by the CD's. The death occured and now they are saying that they will not waive the interest penatlty. On over 300K it is going to be substantial.So did the orgional supervisor lie or is the current Discover Bank supervisor lying.... We also have a number of CD's with them not part of that trust.

Thank you for the good info. Feel armed to deal with them now.

1
Comment #23 by Anonymous posted on
Anonymous
Terrible service and staff. Maturity letters have no information about how to close the account, and the general 800 number is answered by staff who have incorrect information (wrong fax numbers, for example). Over the full 5 years we've had CDs with Discover their staff repeately provided incorrect and incomplete information, and they misrepresent their wire service as same day or next day. Yeah, maybe if you call and call and badger them.  Seem like nice people, but that is not nearly enough to offset the aggravation and wasted time. Almost defaulted on a home closing because of these problems with Discover Bank's CD team.  If you have a choice, use somebody else.

1
Comment #24 by Passing By (anonymous) posted on
Passing By
I had a DISCOVER BANK IRA CD mature recently... wanted to transfer it somewhere else. Discover and the institution I wanted to transfer TO both made mistakes that caused me to have the paperwork arrive at Discover one day after the grace period. Discover people told me the wrong thing when I asked to put it into a savings account at maturity; seems they dont have IRA savings or money markets, so as I was overwhelmed by papers and faxes, it was complicated by realizing I didn't intend to distribute the IRA, and Discover cancelled the wrong transaction... yes, lots of hoops by all involved. I think the banks have gotten themselves sufficiently regulated - to their liking - so that we not only lose on our transactions but when we have to bail them out because they gamble with our tax money. Not to mention that we already subsidize them by letting them borrow cheap from the Fed and charging us more to borrow... why do we need THEM when a National Bank works as in North Dakota has for 100 years?

1
Comment #25 by Anonymous posted on
Anonymous
My mother is 97 and blind so I have her Power of Attorney.  When two of her CD's matured, I sent specific written instructions asking for a check to close the CD's  in each case via Certified Mail.  Discover still messed up both checks.  On the first, they typed a wrong zip code and software changed the city/state to match. I finally got a replacement check made out to me,not my mother but endorsed it over to her account. This month they just plain didn't process the check and claimed they didn't get instructions.  After pointing out they signed for the certified letter they admitted they got the instructions but hadn't yet processed the check.  I had to threaten to go to the feds to get the additional interest for the time extra time they held my Mom's money on both CD's.  They lie and don't exercise reasonable care (spell mother's name wrong every time).  I'm surprised they haven't been shut down.

1