For all of this year the CD rates at GiftsforBanking.com were too low to make the gifts offered by the bank worthwhile. A recent 5-year CD rate hike may have changed this for some people. The new 5-year CD rate is 1.50% APY as of 7/9/2012. When you combine this with a gift, it can make the CD look appealing compared CDs from other banks.
You can get a yield that's 0.25% higher on a 5-year CD at iGObanking.com (GiftsforBanking's sister internet bank).
You can also get higher 5-year CD rates at internet banks like CIT Bank which has a 5-year Jumbo CD with a 1.90% APY and Barclays which has a 5-year CD with a 1.80% APY. At all-access credit unions, you can get even higher rates (2.25% APY at Fort Knox FCU and 2.17% APY at Melrose Credit Union).
If you think the gift that you will receive at GiftsforBanking.com has enough value, that may make the GiftsforBanking CD a better deal than those other CDs. Make sure you don't underestimate the value of the higher interest rate. If you choose this 1.50% CD instead of a 2.00% CD with a $10,000 deposit, you'll earn about $250 less interest over the 5 years ($10,000 x 5 x 0.005 = $250).
As you start the online application, you can select from one of many gifts. They value goes up with the larger tiers which range from $5K to $100K. One example of a gift for the $10K tier is a Samsung 32" LCD HDTV (1080p Resolution). A similar version of this is listed at Walmart.com with a price of $449.54.
There are some important downsides with choosing a gift instead of a higher rate:
One downside is that the bank will determine the value of the gifts and use that value when they send the 1099-INT. That value is likely to be higher than what you could get if you did your own shopping. The higher value reported on the 1099-INT will cost you in taxes. If you decide on a gift, make sure to call GiftsforBanking to learn what the value of the gift will be reported.
Another downside to the GiftsforBanking CDs is the early withdrawal penalty. The penalty for terms over one year equals the value of the gift (including shipping and sales taxes) plus six months of interest of the amount withdrawn. Refer to the GiftsforBanking.com disclosure for more details. The gift value adds quite a bit to the early withdrawal penalty.
When I called the bank last year I was told that the CD rate locks at the date of the application, and you have 14 days to fund the CD. This is important since the bank's rates can have big drops. Several readers have reported a slow CD opening process and poor customer service. I have more details in my previous GiftsforBanking.com CD review. Several readers shared their experiences with opening these CDs in the comments of that post. There are also more comments in this forum thread and in the GiftsforBanking.com reviews section.
GiftsforBanking.com is part of iGObanking.com which is a division of Flushing Savings Bank, FSB, a New York bank with $4.36 billion in assets and 16 branches. The bank's overall health score at DepositAccounts.com is 3 stars (out of 5) with a Texas Ratio of 26.82% (average) based on March 2012 data. It has been a FDIC member since 1943 (FDIC Certificate # 16049).
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.