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Interest Can Be Lost If CDs Mature On The Weekend

Tuesday, May 15, 2012 - 11:28 AM
Just on my soapbox today, with a comment about the day on which a CD matures. We lock in CDs for a specific term, to mature on a specific date. And we are supposed to be able to get our money on the day of maturity.

But I have found that if the maturity date is a Saturday or Sunday, and the bank is not open on the weekend, then you can't necessarily get your money until the following Monday -- or if a three-day holiday weekend, until the following Tuesday.

But this is beyond the date you contracted to be able to have your money back, well into any grace period. And many banks give you no interest during the grace period if you choose to close the CD rather than roll it over. Or, if they do give it, they give it at the rollover rate, which in today's climate could be substantially less than what you were getting (or in any climate, might be notably less than you could get elsewhere). So, they get that extra one, two or three days for free and you get nothing for it.

Even if you set up the CD to close to your checking account at maturity, many banks will only do such closures and transfers manually, meaning it won't be done until they return to work, maybe not until three days later, rather than automatically in the computer on the maturity date. Thus, you can't even write a check to access the money until they return to work -- or else it would bounce upon arrival via the ACH overnight, before they do the CD transaction manually sometime after they open.

This seems very wrong to me. Banks should not be allowed to make CD contracts that mature on a date they will not be honoring that maturity. 

It seems to me that the original date of maturity should be required to be a day on which the bank either is open to honor it or at least will do any closure automatically in its computer. But too often, banks are completely inflexible about the number of days for the CD -- they will be offering, say, a 365-day CD at X rate, and even if you notice that matures on a Sunday when they are not open to close it, they will not let you make it either a 366-day CD  to mature on Monday or a 363-day CD to mature on Friday -- or you would get some drastically lower rate for that different term, even though it will turn out to be the term you effectively have. So, you end up having to give them a day or two or three of your money for free -- they never had any intention to actually let you have your money on the maturity date nor to compensate you for their delay. 

To my mind, it is a fraudulent CD contract if they have no intention of honoring the maturity date. Seems to me there should be a law to make that illegal, bar them from having a CD mature on a date when they will not honor it.

And yes to any reader wondering what got me to write this: I am facing this very situation in the next few weeks, and not for the first time. This time I'm writing about it.
6
me1004me1004343 posts since
Jan 16, 2010
Rep Points: 2,350
1. Tuesday, May 15, 2012 - 11:47 AM
The easy solution is to open the CD on Friday before a long weekend via paper check from your Reward Checking. You get the double interest all weekend. That makes up for the possible loss at the end. :-)
3
AtlantaWolfAtlantaWolf38 posts since
Jan 16, 2010
Rep Points: 170
2. Tuesday, May 15, 2012 - 12:48 PM
Well, opening on a different date would merely mean that you sat on the money in a low-interest or no-interest account up front rather than getting it into the higher rate CD -- not particularly different from that happening at the end, so no gain. 

Also, as an example of how easy it is to get into this situation without even knowing it until the end, if you open, say, a one-year CD on a Friday, as you suggest, it will mature on a weekend! If that money only became available to you on a Friday, then you would have to wait until the following Monday to start a new CD -- and lose those three days of interest you would have had if you opened the CD.
1
me1004me1004343 posts since
Jan 16, 2010
Rep Points: 2,350
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