On Friday US Bank did something that's rare these days. It raised the rate of its competitive long-term CD. The rate of the 59-month CD special increased from 2.00% to 2.25% APY. The two other special CDs with shorter terms are not nearly as competitive. One is a 1.25% APY 37-month CD and the other is a 1.01% APY 19-month CD. Minimum deposit is $1,000, and the maximum is $249,999. These rates are listed in US Bank's CD page as of 10/31/2011. Rates could change at any time, but they typically change on Friday mornings.
On Friday I spoke with a US Bank rep via their online chat service. I was told these special CDs can be opened online from any state. They can also be opened at a branch.
I was told several details about the application process. Here's a copy of the chat:
During the application process it will walk you through the process to get the CD funded. Some options include providing us with an account and routing number that you would like to have the funds pulled from, or we can send you postage to mail us in a check or money order to fund the account.
The CD Rate would lock at the time the application is submitted as long as funding has taken place within 14 business days. It will detail this information further in the account agreement.
You will have the option to E-Sign the signature card or have it mailed out to you and then you can mail it back with your opening deposit.
I also asked about the process of closing a CD when it matures. According to the CSR, you can close the CD by phone. You can have the funds routed to another account at US Bank or at another bank (via an ACH transfer). It's important that you don't let the CD automatically renew since it'll renew into a standard CD which will likely not have a competitive rate. According to the disclosure, you will have a grace period of 10 calendar days from the maturity date to withdraw funds without penalty. No interest is paid during this grace period if the money isn't used for another US Bank CD.
Issues to Note in the Account Disclosure
One important downside with US Bank CDs is a harsh early withdrawal penalty. Here's what is listed in the US Bank's CD Agreement:
If your account has an original maturity greater than one year, the penalty will be the greater of either A or B, plus a $25 early withdrawal fee.
A. One-half of the interest that would have been earned on the funds withdrawn if held for the entire term.
B. 3% of the amount withdrawn.
Early withdrawal penalties for long term CDs are typically only 6 months of interest, so this is much worse.
Another issue is that US Bank reserves the right to refuse an early withdrawal request. Here's what is stated in the disclosure:
This certificate is an agreement to keep funds on deposit with the bank until the current maturity. Except as required by law, withdrawal prior to maturity will be permitted only with the consent of the bank which may only be given at the time of withdrawal.
Another thing to consider about US Bank is what they did to their IRA customers. I have more details in my post US Bank Hits IRA Customers with Higher Fees.
US Bank Overview
US Bank has branches in many states. It has most of its branches in the states of Arizona, California, Colorado, Illinois, Iowa, Kentucky, Minnesota, Missouri, Nevada, Ohio, Washington and Wisconsin.
US Bank is one of the nation's largest regional banks with $310 billion in assets. The bank has an overall health score at DepositAccounts.com of 4 out of 5 with a Texas Ratio of 18.58% (average) based on June 2011 data. Please refer to our financial overview of US Bank for more details. The bank has been a FDIC member since 1934 (FDIC Certificate # 6548).
How This Rate Compares
Unfortunately, a 2.25% yield for a term of around 5 years is very competitive in today's awful interest rate environment. For banks with CDs available nationwide, it's the higest 5-year CD rate. The second best is 2.15% APY at Airbanking (internet division of MainStreet Bank in VA) and 2.10% APY ($100K minimum) at Nationwide Bank. You can get higher rates at credit unions (although we may see more cuts as November starts). The best 5-year CD rate at an all-access credit union is 2.86% APY ($25K minimum with checking relationship) at Digital Credit Union. These rates are accurate as of 10/31/2011.
Searching for the Best CD Rates
To search for the best nationwide CD rates and the best CD rates in your state, please refer to the CD rates section of DepositAccounts.com.