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Barclays Rasies 5-Year and 4-Year CD Rates

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Barclays

Barclays increased the rates on its 5-year and 4-year CDs. Most noteworthy is the new 5-year CD rate increase. The yield went up by 10 basis points to 2.25% APY. The 4-year CD rate went up by 5 basis points to 1.70% APY. There is no minimum balance to open. These rates are accurate as of 4/3/2014. The last rate bump at Barclays was in January. Thanks to DA member OldGuy for reporting on this news in the forum.

Barclays’ long-term CDs used to be great deals due to a small early withdrawal penalty (EWP). That changed last year when the EWP went up from 90 days of interest to 180 days for terms over 24 months. However, the 180-day EWP for long-term CDs is still reasonable. Also, it should be noted that this new EWP was NOT retroactive. It did not affect existing CDs.

DETAILSINSTITUTIONAPYMINMAXPRODUCT
Barclays2.25%--60 Month Online CD
Barclays1.70%--48 Month Online CD
Accounts mentioned in this post. Rates as of August 20, 2014

Not all CD changes have been negative. One is a policy change regarding interest disbursement. When Barclays first started offering online CDs, it did not allow interest disbursement. Now you can receive an interest disbursement from your CD on a monthly basis. You have the option to keep interest in your CD account or transfer it to another account (either the Barclays savings account or a verified external account).

Another nice thing about Barclays is that it clearly gives customers the right to make an early withdrawal. According to Barclays CD terms and conditions document:

You may, subject to an early withdrawal penalty, make withdrawals of principal from your CD Account before maturity

Some banks include wording that suggests the customer can only make an early withdrawal of principal if the bank approves.

One downside with Barclays is that they do not offer IRA CDs.

When I opened a Barclays CD, the application process was simple and smooth. One of the nice features of the application is the ability to designate beneficiaries which will make an account a Payable on Death (POD) account. No social security number was required for the beneficiaries. Another nice feature of the application process was the funding. I chose an ACH transfer to fund the CD, and it went smoothly. They use a trial deposit system to verify the external account. Two small deposits will be made to the external account. No withdrawals are done. External account can be a checking or savings account. You also have the option to mail in a check to fund the CD.

Barclays Online Savings Account

Barclays also has a good deal on its online savings account. It has a competitive rate of 0.90%. Since the savings account was launched in March 2012, there has been only one rate cut. That happened on May 16, 2013 when the yield went down from 1.00% to 0.90%. The online savings account has several nice features such as no minimum balance requirement and no monthly fees. Barclays also has a nice ACH transfer system. I have more details on its ACH system in this blog post.

Bank Overview

The Barclays internet bank is part of Barclays Bank Delaware which is a FDIC member (FDIC Certificate # 57203). The bank is best known in the U.S. for partnering with companies in offering co-branded credit cards. It's part of the U.S. division of Barclays, a British multinational megabank.

Barclays Bank Delaware has an overall health grade at DepositAccounts.com of A+ with a Texas ratio of 4.76% (excellent) based on December 2013 data. Please refer to our financial overview of Barclays Bank Delaware for more details. The bank has been a FDIC member since 2001.

How the Barclays 5-Year CD Rate Compares

Barclays’ new 5-year CD rate is very close to the national rate leader. That rate leader as of 4/3/2014 is CIT Bank which has a 5-year Jumbo CD with a 2.30% APY. One big advantage of Barclays is that its early withdrawal penalty is half that of CIT Bank. You can see the benefit of this by comparing these two CDs in our Early Withdrawal Penalty Calculator. I pre-filled the table with these two CDs. As you can see, the Barclays CD has a higher rate for any early closure. For example, if the CDs are closed after 2 years, the effective yield of CIT Bank’s Jumbo 5-year CD would be 1.15%. The effective yield of Barclays’ 5-year CD would be 1.69%. That’s a higher rate than any 2-year CD that’s nationally available.

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.

Time to Replace an Old Barclays CD?

This type of question will likely be more common in the future. If you opened a Barclays 5-year CD last year that had only a 1.70% or 1.85% APY and a 3-month EWP, you may want to consider breaking the CD and using those funds to open this new CD. You can use our Keep or Break a CD Calculator to see if it's worthwhile for you. For example, if you had opened a 1.70% 5-year Barclays CD with $10,000 in January 2013, and you replaced it with the current 2.25% 5-year CD, you'll have almost $172 more money in 45 months (when the original CD would have matured) if you break the CD.


  Tags: Barclays, CD rates

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Comments
16 Comments.
Comment #1 by Anonymous posted on
Anonymous
Which is the best deal: Barclays 5 year at 2.25%, Everbank 5 year at 2.27% or Melrose 5 year at 2.27%?

2
Comment #7 by Anonymous posted on
Anonymous
Or maybe CIT Bank? - 2.30 APY, 5 yr.

1
Comment #8 by Anonymous posted on
Anonymous
I think Barclay's is the best deal.  Do you agree?

1
Comment #2 by ANONYOMOUS (anonymous) posted on
ANONYOMOUS
R U FOR REAL???

8
Comment #3 by Anonymous posted on
Anonymous
Doesn't the EWP for each CD have a bearing on the answer to this question?

1
Comment #4 by Anonymous posted on
Anonymous
How difficult is it to change IRA CD banks?  I have an IRA CD account at Discover Bank and have seen several banks which offer higher rates of interest on their IRA CDs.  How difficult is it to move to another bank?

3
Comment #5 by Anonymous posted on
Anonymous
It's not difficult for most people.

4
Comment #9 by Anonymous posted on
Anonymous
What's the best way to do it?

1
Comment #10 by Anonymous posted on
Anonymous
If you have to ask, it will be too difficult for you.

2
Comment #11 by James Barnes posted on
James Barnes
Can it be done by making the request to the bank at which the current CD is held?

1
Comment #12 by KevinM posted on
KevinM
You will initiate the process at the new bank or CU. They will have a transfer authorization form that you and they will fill out, and then send to the current bank. Some financial institutions don't require anything else, but some may require that the form have a notarized signature or a signature guarantee. To avoid having to send the form twice, you probably should check with the existing bank. Also, if you are breaking a CD at the existing bank, you'll probably have to work directly with them to authorize the early withdrawal; hopefully they have an IRA savings or money market account that the CD funds can be deposited into while awaiting the transfer.

1
Comment #13 by James Barnes posted on
James Barnes
Thank you.  This is much-appreciated.

1
Comment #6 by Robert (anonymous) posted on
Robert
When my Ally 5-year CD's mature, I'm going to switch to Barclays

2
Comment #14 by Anonymous posted on
Anonymous
The ability to make an early withdrawal from a CD, if necessary, is an important feature for me, and I was attracted to Barclays because of the positive wording of the terms that you highlighted above.  However, when I when read through the terms and conditions document online today, I don't see the same wording that you quoted.  The current wording says, "A penalty will be imposed for any withdrawal of principal from your CD Account before maturity."    (The early withdrawal penalties  are the same as you described.)  

Additionally, an earlier section of the document, regarding the withdrawal of interest, says this:  "You may request that interest be withdrawn from your CD Account on a monthly basis and transferred to either your Barclays Online savings account or a verified external account. You may not make withdrawals of principal until maturity."

This suggests to me that early withdrawals may now be at the discretion of the bank.

1
Comment #15 by lou posted on
lou
Reread this - you are misinterpreting the language.

1
Comment #16 by Anonymous posted on
Anonymous
#14  I read it the same as you do!  It needs clarification on the bank's part.

1