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7-Year CD Offering

Saturday, October 26, 2013 - 12:03 PMMidFirst Direct - Details
 

I just noticed, on the CD rates table for 6+ years, that MidFirst Direct--which offers CDs to customers in several states--is offering a 7-year CD at 3% APY.  I tried to check its website but was unable to get access.  I also remember that a number of members here had troubles with the account opening process, particularly ChexSystems inquiry reports.  Does anyone have any recent experience with MidFirst Direct?  Thanks.

 
4
OldGuyOldGuy34 posts since
Jan 23, 2013
Rep Points: 681
1. Saturday, October 26, 2013 - 3:02 PM
Finally got on MidFirstDirect.com using Foxfire.  The 3% 7-year CD was there.
3
OldGuyOldGuy34 posts since
Jan 23, 2013
Rep Points: 681
2. Saturday, October 26, 2013 - 4:23 PM
Does anyone know what the Early Withdrawal Penalty is for their 5 and/or 7 year CDs?  I can't find it on their website.  Thanks.
4
paoli2paoli21,140 posts since
Aug 10, 2011
Rep Points: 5,083
3. Saturday, October 26, 2013 - 5:26 PM
Way to go OldGuy!
5
ShorebreakShorebreak2,365 posts since
Apr 6, 2010
Rep Points: 12,596
4. Saturday, October 26, 2013 - 5:29 PM
Ken's post about the 5-year CD on 9/16/13 said he was told by a CSR the penalty was 12 months' interest on CDs of 24+ months.  It looks like the Truth in Savings disclosures are linked before the application process is completed, so maybe you can cancel an online application after you've read them and before you fund.  I haven't had the guts to try this yet because I'm still suspicious that this bank's application process is like iGOBanking.com's--frustrating. 
5
OldGuyOldGuy34 posts since
Jan 23, 2013
Rep Points: 681
5. Saturday, October 26, 2013 - 5:55 PM
Thanks Old Guy.  That sounds familiar and that is more than I will accept for a 5 years CD unless I can't find something else.  The rates are good tho but I don't like going out as long as 7 years with so much being rocky with our country.  I am concerned about what changes could be enacted within 7 years with our banking system.  There could be some major changes that can affect holders of CDs depending on who is going to be running our country after Obama.  I prefere staying with the 5 year CD and trying to get no more than a 6 month EWP.
4
paoli2paoli21,140 posts since
Aug 10, 2011
Rep Points: 5,083
6. Sunday, October 27, 2013 - 7:05 PM
Are the total amount of CDs (7 year CD) you can purchase capped at $250,000?
3
loulou521 posts since
Aug 3, 2010
Rep Points: 3,239
7. Sunday, October 27, 2013 - 7:53 PM
Under the 6 yr and over CD rates with national and Oklahoma in Ken's website it shows no limit. It has a $500,000 limit on the callable version
3
AllyAlly773 posts since
Jan 16, 2010
Rep Points: 2,254
8. Sunday, October 27, 2013 - 8:59 PM
In the 9/16/2013 thread, Ken indiicated the maximum deposit is $250,000. But maybe this has changed?
2
loulou521 posts since
Aug 3, 2010
Rep Points: 3,239
9. Sunday, October 27, 2013 - 11:00 PM
I believe the EWP is actually 2 years for the 7 year CD.  Seems kind of harsh to me.
3
mustsavemoremustsavemore40 posts since
Jun 26, 2013
Rep Points: 121
10. Sunday, October 27, 2013 - 11:52 PM
Mustsavemore, who told you this?
2
loulou521 posts since
Aug 3, 2010
Rep Points: 3,239
11. Monday, October 28, 2013 - 12:16 AM
I have a handout from MidFirst Bank that shows this for their regular and callable CDs.  I assume that this would also apply to their online CDs. Review of midfirst bank
Midfirst direct is the online version of midfirst bank.
1
mustsavemoremustsavemore40 posts since
Jun 26, 2013
Rep Points: 121
12. Monday, October 28, 2013 - 1:04 AM
Review of midfirst bank
Midfirst direct is the online version of midfirst bank.
1
mustsavemoremustsavemore40 posts since
Jun 26, 2013
Rep Points: 121
13. Monday, October 28, 2013 - 7:39 AM
From their website

Disclosure 1 Minimum deposit and balance required. No brokered deposits. Deposits limited to $500,000 for accounts opened in a MidFirst banking center and $250,000 for accounts opened online at midfirst.com. Penalties may be imposed for early withdrawal and reduce earnings.

2 The Callable CD option allows MidFirst to redeem the CD after the lock period stated or anytime thereafter. If the CD is called, you are still guaranteed the stated yield for your investment period. Penalties may be imposed for early withdrawal and reduce earnings.

Rates may vary by location. Visit or call your local MidFirst Bank for details.
1
AllyAlly773 posts since
Jan 16, 2010
Rep Points: 2,254
14. Monday, October 28, 2013 - 8:53 AM
 MidFirstDirect.com rates are only available to residents of Arkansas, Arizona, California, Florida, Missouri, Nevada, New Hampshire, New York, Oklahoma, Texas, and Wyoming. IRA and Trust CDs are not available through MidFirstDirect.com. If you withdraw any principal before the maturity date, the following penalty schedule will apply whether interest has been credited or not: 7 to 90-day term - all interest; 91-day to 11 month term - 3 months interest; 12 month to 48 month term - 6 months interest; 60 month term - 12 months interest; 84 month term - 24 months interest. Thank you again for contacting MidFirst.
6
AllyAlly773 posts since
Jan 16, 2010
Rep Points: 2,254
15. Monday, October 28, 2013 - 2:34 PM
So let me get this straight. The maximum deposit for a Midfirst Direct CD is $250,000 and the penalty for a 7-year CD is 24 months. Yes?

Ally, where did you see the language for the Midfirst Direct EWP's?
4
loulou521 posts since
Aug 3, 2010
Rep Points: 3,239
16. Monday, October 28, 2013 - 5:12 PM
The penalty information was from an email that they sent when I emailed them to ask  and the $250,000 was from their website under disclosures. 
3
AllyAlly773 posts since
Jan 16, 2010
Rep Points: 2,254
17. Monday, October 28, 2013 - 5:28 PM
Thanks
3
loulou521 posts since
Aug 3, 2010
Rep Points: 3,239
18. Monday, October 28, 2013 - 7:20 PM
So are we all in agreement that despite the 2 year ewp that this is still a good deal?
4
mustsavemoremustsavemore40 posts since
Jun 26, 2013
Rep Points: 121
19. Monday, October 28, 2013 - 7:56 PM
It kind of depends on what percent of your savings you are using to purchase this CD. I would not be comfortable with a 2-year penalty if it was most of my money; however, if it was a relatively small percentage, I could rationalize it. You also need to look at your alternatives and see how you would fare breaking the CD with a 2-year penalty as opposed to a CD with a lower yield but also a lower penalty. Also, I would want to know if they had any language prohibiting an early wihdrawal.
3
loulou521 posts since
Aug 3, 2010
Rep Points: 3,239
20. Monday, October 28, 2013 - 8:35 PM
If you ladder CD's you will never have to worry about breaking a CD early. Have your emergency money in a reward checking account. When you wait for a higher interest or break a CD to get a higher rate you lose. You will always have a maturing CD to invest in the higher rate if you ladder your CD's. As rates go up more banks or credit unions will offer higher rates to compete. If you don't get this one there will be one done the road that you will be able to get. If you break a CD to get this rate there will be one down the road that might be higher. When you have money set aside to get a CD, go for the highest rate with what money you can afford. Plan on leaving it there. 
4
AllyAlly773 posts since
Jan 16, 2010
Rep Points: 2,254
21. Monday, October 28, 2013 - 9:52 PM
I disagree with Ally about this. I don't think ladders are the way to go right now. The yields on short term CD's are awful, so I would be very hesitant to buy any of them. Instead, I would go long and plan to withdraw early if interest rates spike. Having said this, you need to do what you're comfortable with.
4
loulou521 posts since
Aug 3, 2010
Rep Points: 3,239
22. Tuesday, October 29, 2013 - 8:44 AM
My CD's have been laddered for years. We started them with long term CD's saving for our children's education in the late 60's or early 70's. As we saved more money for CD's we purchased the highest rate no matter how long. They became laddered accidently because of always buying the highest rate CD's and the CD's we purchased first would come due. The shortest CD's we have purchased was in 2006 a 1 yr CD for 12% and in Nov 2008 when we purchased 70 weeks for 7% at a local credit union and it was with money that we would need in 2010 for a house we would be building.  Because we always purchased the highest rate CD's they eventually were laddered but it did not start out that way. Sorry if I gave the wrong impression. We have been doing this since the 70's. I first heard of CD's from my godmother's son who managed a Comerica branch and it was before 1973 but not sure what year but it was paying 8% for 5 years. I could not do it at this time because we had just purchased 58 acres to build a home but told my mom about it and she did it. I now have a 10 year CD that is paying just under 4% that won't mature until 2021. The rates may be higher before it matures but if I had put it in short term CD's I figure I would have lost money and would have had to make up the 2-3% I would have made had it been in the CD I have now. One time we purchased a 10% CD for 10 years at Flagstar before the rates dumped. These rates sound great but remember inflation was much higher then. I know it sounds crazy but if the Medicare premiums go up for singles making 47,000 I won't want to make more interest on CD's that are not in IRA's because I have to start taking RMD's next year and want to convert more traditional IRA's to a Roth. I will no longer be able to convert to a Roth without paying higher premiums. I don't think they will go up now but it is a proposal on the table. Now the higher premiums go up for singles with a AGI of $85,000 so I have been able to convert some for a few years. Oh and I purchased 2 CD's from Comerica when they offered a competitive interest rate with the oppurtunity to buy 2 airline tickets at full price, the next 2 tickets at 1/2 price and the next 2 tickets at 1/2 of that and the last 2 tickets at 1/2 of the 3rd set of tickets. Because my husband's company was sending some employees to a mandatory class in Hawaii they were reimbursed for their tickets and the wives and children could afford to go on the trip buying the tickets from me. This was in 1990. Did not have to pay taxes on the reduced tickets prices. 
3
AllyAlly773 posts since
Jan 16, 2010
Rep Points: 2,254
23. Tuesday, October 29, 2013 - 11:43 AM
All I am saying is now is the wrong time to set up a ladder. If you already have done it for many years, that's one thing, but if you are starting from scratch, that's another thing.

BTW, the 1 year CD for 12% you bought in 2006 must have had restrictions in the amount you could purchase. If not, which credit union was selling a 12% CD? Also, where did you get a 70 month 7% CD in Nov of 2008? Was that one also restricted in how much you could buy? I would love to know the names of these credit unions.
3
loulou521 posts since
Aug 3, 2010
Rep Points: 3,239
24. Tuesday, October 29, 2013 - 12:16 PM
I agree with you Lou this is not the time to start to ladder CD's. But it is never to late to save. In my opinion reward checking accounts is the way to start to save at this time.

First Community Credit Union is where we purchased the 12% and the 7% in 2008. 
4
AllyAlly773 posts since
Jan 16, 2010
Rep Points: 2,254
25. Tuesday, October 29, 2013 - 1:42 PM
12% was for $5,000. Not sure if that was the limit or what we had at the time. Purchased one for me, my husband and each of the kids. Will look for the 7% one later. It may have been 70 weeks and not 70 months. Not sure I posted that correctly. But we did have a 70 month at 7% from there but not sure if that was the one in 2008. 
4
AllyAlly773 posts since
Jan 16, 2010
Rep Points: 2,254
26. Saturday, November 2, 2013 - 1:02 PM
At Bank Performance Strategies our mission is to unleash the value embedded in time deposits.  This 3% offer is attractive when compared to the 2.69% rate that the banks can borrow at through the FHLB system for that term.  Regarding the penalty, when there are no call options involved our early withdrawal penalty valuation models indicate that given the current yield curve and based only on maximizing ending account values at the end of 7 years, the 84-month CD at 3% APY with a 24-month penalty is equivalent to a 2.01% APY with a 6-month penalty.   In other words, both of these approaches can be expected to yield 3.00% to maturity.  Therefore, based on the math alone, if you would be comfortable with a 2.01% APY and a typical 6-month early withdrawal penalty, you should be comfortable with the 3% APY with this higher penalty.  Neil Stanley Neil@Bank-PS.com
2
NeilStanleyNeilStanley3 posts since
Nov 2, 2013
Rep Points: 7
27. Saturday, November 2, 2013 - 1:26 PM
The prior analysis is applicable only if the CD is not callable.  It is signficantly more difficult to realize advantageous maturity values with a callable CD.  Banks retain the call option specifically to insure that you do not achieve an attractive final maturity value.
2
NeilStanleyNeilStanley3 posts since
Nov 2, 2013
Rep Points: 7
28. Saturday, November 2, 2013 - 2:00 PM
Neil, your analysis is interesting, although I am not sure how you equate the 3% 7-year with a 24 month penalty with one at 2.01 APY and 6 months penalty. Anyway, I don't think either is a good deal. Looking at the yield curve today and the odds of rate increases at the outer end of the yield curve, namely in the 5, 6 and 7th year of the curve, I think the retail customer needs a higher yield to compensate for the risk of increasing rates. We saw what happened this summer when just a whiff of increasing rates caused the 10-year yield to almost double. Currently, the banks are taking advantage of retail customers with these super low yields, and the CD holders do not appreciate the pain in holding these CD's for 7 years when rates may be considerably higher in the future. It is understandable because for the last 30 years rates have been in a declining pattern; most of us have never experienced the reverse. 24 month penalties are a deal breaker for me.
4
loulou521 posts since
Aug 3, 2010
Rep Points: 3,239
29. Saturday, November 2, 2013 - 4:49 PM
Lou, I value your insights.  I left my jobs as a bank investment portfolio manager of $2 billion and more recently a bank CEO to help retail bankers and depositors bring applied math to these types of situations.  It is obvious from your participation in this and other discussions that you are no ordinary deposit investor.  Yet, even you don’t appear to have the tools to run the scenarios like professional money managers must.  I launched Bank Performance Strategies to enable real people to avoid the pitfalls that snare so many depositors.

First, we must know where the money says the market is now and in the future.  You might well be right that the owners of billions of dollars moving through the market are wrong.  But, the wise investor wants to know where the market is and what the market predicts-- That is the current rate and forward implied yields for what bankers and their banks sell money for.  That is the FHLB advance rate.  Today, the 7-year advance rate is 2.69%.  This means that the professionals in the market believe an investment today of $100,000 would receive a fair market value if it was worth about $120,400 at maturity.  To say that today’s yields above that are not a good deal means that you believe you will get more than the market believes is achievable under today’s and the future expected results.  You may be right and you may be wrong.  Time will tell.

Every day the market seeks equilibrium between short and long-term investments where managers are seeking to maximize long-term value.  There is pain in investing too long when rates later rise significantly. And there is pain in investing too short when rates later fall or remain steady.  Our models are based on accountable money managers seeking to minimize both aspects of pain.  They cannot merely say how they feel to justify their decisions.  They must run the math and demonstrate which strategy they are pursuing because under the current facts and their assumptions it is most likely to work to their advantage.  The models allow accountable money managers to use more facts and fewer assumptions.

Our model for the value of early withdrawal penalties considers the interest rates, the duration of the CD contract, and the market’s own expectations about future interest rates to determine a specific calculation for any early withdrawal penalty.  Without the math we are reduced to assumptions and guesses.  My earlier comment was based on the ability of the investor to turn $100,000 into $123,300 from either a fixed contract of 3.00% for 7 years or a fixed contract of 2.01% for 36 months, paying the penalty at the optimal time, and reinvesting a projected forward implied yield for the remaining 48 months at 3.99%.  The math makes the two equivalents because it takes us to the same value at maturity.

Leaving money on the table because I cannot appropriately account for the legitimate impact of the terms and conditions of the deal and my expectations on the ultimate value of the investment at my investment horizon date is a deal breaker for me.  I hope this is helpful.
3
NeilStanleyNeilStanley3 posts since
Nov 2, 2013
Rep Points: 7
30. Saturday, November 2, 2013 - 7:26 PM
Thank you, Neil, your explanation for how you equate the two 7-year CDs makes sense. I agree that any decision you make today with your money has to take in account relative investments or cash-related alternatives available in the marketplace.

I wonder if quantitative models that attempt to specify forward rates and inflation expectations can fully appreciate a Fed monetary policy that has deviated as far from the norm as I've seen in my lifetime. We are in uncharted waters. Can you tell me what long-term rates would be today if we didn't embark on these QE programs or had a federal funds rate consistent with CPI. I know the Fed has indicated it will not taper until 2014 or raise the federal funds rate for many years, but I wonder how much the Fed really controls the market on the long end of the curve, as we saw this summer. There may come a day when the Fed loses control of interest rates because of shocks to the economy, rising inflation or further currency depreciation. I wonder how much this Fed Board of Governors is any different from the group who completely missed the real estate implosion and the credit crisis in 2007-09.

You are correct that savers today may be facing a hobson's choice of taking the yields offered by banks or sitting on the sidelines with almost no yield. I guess one needs to make the best decision among an array of undesireable options.
4
loulou521 posts since
Aug 3, 2010
Rep Points: 3,239
31. Sunday, November 3, 2013 - 7:06 PM
Watch Washington Journal today and one of the guests wrote an article "Obama's Quiet Bull Market". He said that the market has gone up 188% since his election and has matched in 5 years what Reagan did in 8 but has not matched Clinton yet. Said that if you counted inflation it would be worth what it was in 1999. I think he said that the market lost 40% under Bush. He or one of the callers said if you were in fixed income since 1999 you would be in a better position than if you had been in the market. The guest said that 400 billion is still out of the market but starting to come back in. Like always he said people buy high and sell low. PRETTY SCARY. He also said if Google or Apple was in the Dow it would be 20,000.  
1
AllyAlly773 posts since
Jan 16, 2010
Rep Points: 2,254
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