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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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How Add-On CDs Can Benefit Savers

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An add-on CD allows you to make one or more additional deposits to your CD before it matures. For a typical CD, you open the CD with a certain amount, and you’re not allowed to make additional deposits until the CD matures. The add-on CD is most useful as a little protection against falling interest rates. If rates fall during the add-on CD term, you can always fall back on the add-on CD. Instead of opening a new CD, you can just deposit the funds into the add-on CD.

Unfortunately, add-on CDs are rare, and they have become less common in the last few years due to the interest rate environment. Back in 2008 one of my local credit unions had offered a 5-year add-on CD. I jumped on that deal, and it proved useful as interest rates fell. I think too many people also jumped on this deal. The credit union removed the add-on feature to all of its long-term CDs. Now only its 1-year CD allows add-on deposits.

The most useful add-on CDs have long terms and allow unlimited additional deposits. Any number of deposits of any size can be made to the CD during its term. Unfortunately, it’s common for banks to limit the number of add-on deposits.

CIT Bank’s Achiever CDs

CIT Bank is one of the few internet banks that offers add-on CDs. Its Achiever CDs allow you to make one additional deposit of any size during the term. Restricting the number of deposits to just one is a downside. This may cause you to wait for several months before you accumulate all of the funds that you want to deposit. Another downside with the Achiever CDs is a minimum initial deposit of $25,000. This makes the add-on CD less useful as a form of protection against falling rates. You have to commit a sizeable amount for the initial deposit.

CIT Bank Achiever CDs have another feature in addition to allowing an add-on deposit. They allow you to bump-up the rate one time during the term. They allow for one rate bump. If the Achiever CD rate goes up, you can take advantage of the higher rate.

CIT Bank offers Achiever CDs with terms of one and two years. As I mentioned above, add-on CDs with long terms are more attractive.

Bank5 Connect’s 2-Year Investment CD

The new internet bank, Bank5 Connect, has a 2-year add-on CD that it calls an Investment CD. Minimum deposit is $500. It allows additional deposits of any amount at anytime during the term of the CD. You can also set up automatic deposits from your Bank5 Connect’s checking or savings account into this Investment CD.

Bank5 Connect’s Investment CD has one big advantage over CIT Bank’s 2-year Achiever CD. The Investment CD has a minimum deposit of only $500. That’s 50 times less than the Achiever CD. This makes the Investment CD a much better product to use as protection against falling rates. If you want to protect yourself against falling rates, just open the Investment CD with $500. If rates happen to go up, just don’t add to the CD. With only $500, you have very little interest to lose (compared to what you could have earned with higher rates). However, if rates do fall or even if they remain about the same, you’ll find the add-on CD to be very attractive.

Here’s an example of how useful the Investment CD can be. Let’s say you have CDs maturing one year from now. Open the Investment CD today with a $500 deposit. Let’s say short-term CD rates stay the same over the next year. When those CDs mature, you decide that you don’t want to lock in that money into a long-term CD. You decide you don’t want terms longer than one year. You can either open a new 1-year CD or you can add to your 2-year Investment CD. You will probably find that the 2-year Investment CD has a higher rate than any 1-year CD rate. So adding to the Investment CD becomes the obvious best choice.

Your Best Add-On CD?

Have you benefited from add-on CDs? What was the best add-on CD that you had?

  Tags: Bank5 Connect, CIT Bank, CD rates

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Comments
9 comments.
Comment #1 by OldGuy posted on
OldGuy
The best add-on CD I ever had was a 2-year CD at Androscoggin Bank in Lewiston, Maine.  It was offered online nationwide in mid-2010 with a 2% APY.  That rate was then competitive with regular, non-add-on 2-year CDs.  I opened several with a $500 minimum deposit, and was able to add to their balances during the rest of that year as rates declined elsewhere.  It was a great deal.   

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Comment #2 by Sylvia posted on
Sylvia
My favorites were at Stanford FCU and Northwest FCU, when rates were 2% or so for 2 year terms.  Stanford has apparently discontinued that product, while revamping its rate structure to reward "relationships."  Northwest still offers add-on CD's -- .6% for 1 year, .95% for 2 years, minimum deposit of $500 for each -- though rates are now lower than for their non-add-on counterparts

1
Comment #3 by nothlit posted on
nothlit
My credit union has offered an automatic add-on CD for the past few years that I've taken advantage of. It's a bit limited in how/how much you can contribute: Starting from a balance of zero, you can contribute a maximum of $500 per month for 12 months. But it earns around 3%. At the end of the 12 months, the balance is transferred out to a regular savings account and you can start over (from zero) in the CD at whatever the new interest rate is.

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Comment #4 by Anonymous posted on
Anonymous
hate this new format.  Sorry.  Love your information.

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Comment #5 by Anonymous posted on
Anonymous
I find the format to be attractive, and equally easy to navigate.

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Comment #6 by Anonymous posted on
Anonymous
my favorite was the SECU promotion to end all promotions.  We opened an add-on CD and then as the other promotions ended, it all went into the add-on cd.

The next favorite add-on was a provident/m&t add-on cd.

currently, I have a 4yr add-on cd from trustbankd that will mature next year with a ~1.99APY.  I'm pouring whatever I have leftover into that now.  (I opened it a little right after the first promo occurred...mostly because it allowed CC-funding)

as a result, I also just opened a 2yr CD from the bank5connect also mostly for the backup plan of a savings account feeling (and the CC-funding ability)

 

1
Comment #7 by Anonymous posted on
Anonymous
Over 7 years ago, Self Help Credit Union in Cal had a CD that allowed additional deposits. I opened 2 (one 3 year and one 5 year) with the minnimum amount. When interest rates began to tank, I looked to add to those accounts. I received an email that the terms had been changed.

The only reason I opened those accounts were for the additional deposit option.

Easy to offer when rates are rising. I wonder how these terms will be honored (when / if) rates fall again.

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Comment #8 by Alskar (anonymous) posted on
Alskar
Denver Community Credit Union allows any number of additions to their CD's as long as they're $25 or more.  They also have a lower minimum to get the "jumbo" CD interest rate ($50K vs the typical $100K).

The ability to add-on funds also helps when funding an IRA CD from multiple sources.  As the funds roll in from different IRA accounts they just get added to the existing CD. 

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Comment #9 by Anonymous posted on
Anonymous
There was the Inter National Bank (of Texas) 3.25% unlimited Add-On CD (open to anyone, as long as you went to Texas to open the account) just about 3 years back (so those who have them still have 2 years left on them). But not only did the rates fall, but they have dropped all Add-On CDs at this time. There was also an Add On CDs from a closed, but very large local credit union (allowing deposits up to your opening amount), but they too stopped offering that product a couple years ago. Hopefully as rates start creeping up, and the banks will need to offer more things to attract more money, this product will come back.

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