Goldman Sachs High-Yield CDs Are Internet Bank Rate Leaders
As I was reviewing the top nationally available CD rates, I noticed that many of Goldman Sachs Bank USA’s (GSB USA) High-Yield CDs offer rates that are near or at the top when compared to CDs offered by other internet banks. All GSB USA High-Yield CD rates dropped in early March, with the two longest terms (5- and 6-year) now earning 1.90% APY. The five High-Yield CDs with terms between 12-months and 4-years currently earn 1.85% APY. The minimum opening deposit of any of the High-Yield CDs is $500. The maximum amount on deposits for all individual and joint deposit accounts combined may not exceed $1 million per Account Owner.
You have 30 days from the day a High-Yield CD is opened to fully fund the CD. The term of the High-Yield CD will begin on the day of the final deposit. GSB USA also offers a 10-day rate guarantee on its High-Yield CDs. This guarantee ensures you will receive the highest interest rate offered during the 10-day period beginning on the day the High-Yield CD is opened, provided the $500 minimum deposit is met.
GSB USA has a detailed High-Yield CD FAQs page that provides a great deal of information, including a description of the Early Withdrawal Penalty:
CD terms of 12 months to 5 years – 270 days simple interest on the principal at the rate in effect for the CD.
CD terms of more than 5 years – 365 days simple interest on the principal at the rate in effect for the CD.
You cannot withdraw a portion of your principal at any time prior to maturity.
The following is a synopsis of other information from the FAQs:
- Accounts can be funded by an internal transfer, an ACH transfer, wire transfer, or check.
- Monthly interest disbursements are allowed to your savings account or to one of your linked external bank accounts.
- 10-day grace period at maturity. Interest is earned during grace period up to the day before the funds are withdrawn.
Up to six beneficiaries can be added to each account, with Social Security numbers required for each beneficiary. A beneficiary must be an individual: trusts or other entities cannot be named as a beneficiary. In fact, trust accounts are not offered at all.
No-Penalty CD
For those who want the liquidity of a savings account without the possibility of more rate cuts, a No-Penalty CD is a good option. Unfortunately, following a series of five rate cuts in the last eight months, GSB USA No-Penalty CDs are no longer the most competitive no-penalty CDs available.
When considering a no-penalty CD, you need to remember that longer terms are better, particularly in a falling rate environment. A shorter term provides no benefits if the APY is comparable to that of a longer-term no-penalty CD. The longer term does provide a benefit: If rates fall and you want to keep earning the established APY, just let the CD keep earning interest. If rates should rise or if you need the money, you can close it. I don’t see any downside for choosing longer-term no-penalty CDs that function like the No-Penalty CDs from Marcus.
There’s an FAQ section for the No-Penalty CDs that lists features unique to the No-Penalty CDs:
Can I add additional funds to a No-Penalty CD once it’s been opened?
Once the balance of your No-Penalty CD reaches $500 or more, you may not make additional deposits. (This is different from our High-Yield CD, which you can continue to add to during the first 30 days, even after reaching the minimum balance.)
Are there any restrictions to withdrawing funds from my No-Penalty CD?
You can withdraw the entire balance plus all interest earned beginning seven days after your No-Penalty CD is funded. If you withdraw your funds, the account will be closed.
Note: partial withdrawals of principal are not allowed.
According to CSR, closing a No-Penalty CD can be done online without any direct involvement of customer service. However, this doesn't speed up the process: CSR stated that closing a No-Penalty CD will take one or two business days, even when the funds are transferred internally to the Online Savings Account. Update 4/20/20: I just confirmed with GSB USA that the No-Penalty CD can now be closed and the funds moved internally to the Online Savings Account without any delay as long as it has been at least seven days from the account funding.
How do I close my No-Penalty CD?
To close your No-Penalty CD, go to your Account Detail page and click ‘Close this account.' If your account is eligible for withdrawal (beginning 7 days after the day of funding), we’ll confirm your balance and ask where you’d like to transfer your funds (to another Marcus account or to your linked account at another bank). If you’d like to transfer to multiple accounts, or if you’d like us to mail you a check, please give us a call to close your account at 1-855-730-SAVE (7283).
Online Savings Account
Earlier this week, GSB USA lowered the rate on its High-Yield Online Savings account to 1.55% APY, putting its rate 20 bps lower than the current top-rate online savings accounts offered by Live Oak Bank, ConnectOne Bank, and First Foundation Bank.
Features unique to the Online Savings Account include:
- No minimum opening deposit required.
- APY applies to all balances of $1 or more.
- Free ACH bank-to-bank transfer service.
- Up to four external accounts can be linked.
- Maximum outgoing transfer is $125k per transaction if done online (no limit if done by phone).
- No incoming transfer limit (maximum balance limit must be maintained).
- ACH outgoing transfers take one to three business days.
- Funds received by ACH transfer initiated at GSB USA available on the third business day. Funds received by ACH transfer initiated by another bank available on the next business day (see FAQs for full details).
Availability
Goldman Sachs Bank USA operates its internet bank under the brand "Marcus by Goldman Sachs." Savings Accounts and CDs are available nationwide and can be opened using the Bank’s online application. Account owners must be at least 18 years old and must be a U.S. citizen or legal resident.
Four years ago, Goldman Sachs Bank USA rebranded as GS Bank as it completed the acquisition of the internet bank portion of GE Capital Bank. The Marcus by Goldman Sachs brand was established in October 2016, functioning as an online platform offering unsecured personal loans to consumers. As I described in a November 2017 blog post, Goldman Sachs decided to consolidate savings accounts, CDs, and personal loans under the Marcus by Goldman Sachs brand. All loans and deposit products are provided by Goldman Sachs Bank USA.
Bank Overview
Goldman Sachs Bank USA has an overall health rating of “A+” on DepositAccounts.com, with a Texas Ratio of 1.74% (excellent), based on December 31, 2019 data. In the past year, the Bank has increased its total non-brokered deposits by $22.69 billion, an excellent annual growth rate of 26.88%. Please refer to our financial overview of Goldman Sachs Bank USA (FDIC Certificate # 33124) for more details.
As of the latest FDIC data (December 31, 2019), Goldman Sachs Bank USA is the twelfth largest bank in the country, with more than $228 billion in assets, deposits in excess of $168 billion, and more than 1,350,000 customer accounts.
How the High-Yield CDs Compare
When compared to the similar length-of-term CDs tracked by DepositAccounts.com that are offered by internet banks and require a similar minimum deposit, Marcus by Goldman Sachs High-Yield CD APYs* currently rank at or near the top.
The above rates are accurate as of 4/20/2020.
To review the best Savings, Money Market, and CD rates, both nationwide and state specific, please refer to DA's Savings Account Rates Table, Money Market Account Rates Table, and CD Rates Table.
*We are continuing to keep our rates up-to-date, but are just too many rate cuts for us to process the changes quickly. For the time being, please be aware that the rates listed at DepositAccounts may not reflect the latest rates published by the banks and credit unions.
Another nice feature about Marcus is that they offer free wire transfers.
I believe Ally has a similar policy that you can't close their NPCD within 6 days of opening. So I assume that during that 6 days you can't close it online at Ally either.
Are you saying that at Ally, that 6 day no closure rule doesn't apply to renewals?
Something else maybe I should mention while I'm on this topic in case it helps somebody... You can't insure an IRA account for more than $250,000. That's the maximum limit per FI, there's no way around it. Unlike a trust account, adding beneficiaries to an IRA account does not change that limit. That's important to know if you have an IRA that's over the limit. The excess isn't covered by FDIC or NCUA insurance. I've never looked at some of the plans that the states have like Massachusetts. So I don't know if they cover more than that or not in an IRA account. But the two Federal insurers do not.
So if you have an IRA account, that can be insured up to $250,000 IN ADDITION TO any insurance you have on your other accounts. An IRA account is considered a separate category from other types of accounts that you have at that financial institution and is insured separately.
What I'm saying is, if you have over $250,000 in an IRA account, the excess above that amount is not insured no matter what you do. I'm confident that is correct.
Correct. Retirement accounts are included in a separate ownership category for FDIC/NCUA insurance purposes. ALL your covered retirement accounts at the SAME FI (e.g. Roth IRA and Traditional IRA) are added together and insured up to a maximum of $250,000. Adding beneficiaries to the retirement account(s) does not increase this insurance coverage limit.
This is a disaster. If people lose confidence in the banking system, it's all over. You should never be allowed to put yourself in an uninsured situation in an insured FI without at least a warning. Congress must be pressured to fix the terrible flaws in the FDIC and NCUA insurance system.
If you're not very dependent on that income, and it probably doesn't make much difference.
But the more dependent you are on the income from your cash, the more it might make sense to allocate a larger percentage of it to longer-term fixed rate instruments so your income will be more predictable over time.
Unlike stocks, for example, there isn't much data available for historical rates by FI, just a few charts that don't go back very far. And there certainly aren't any studies (at least that I know of) of strategies such at timing versus diversification as there are for stocks.
I went for many years just keeping the entire cash portion of my portfolio in variable rate liquid accounts under the same theory I believe about stocks -- that there is no advantage in trying to time investment, you will do at least as well simply holding and traveling up and down with the market.
I still think this is a valid theory when it comes to stocks. There is lots of evidence to back that up. And I suspect it's also true about bank deposits, although since I am not as sure, and there is no good evidence I know of, I hedge my bets keeping some liquid and trying to time some. As part of that strategy, as I have mentioned before, I so far have never bought a CD with a term greater than about 3 years. Theory behind that is that anything over that is more speculative with respect to rates and less likely to be timed successfully.
In this environment I think its a pretty successful strategy. I am currently getting a weighted average of 3.19% on my bank deposit portfolio. But that will be going down a little soon as things mature. And I think the strategy will have to be tweaked at least in different kinds of rate environments.
So for me it's been a mix of liquid and longer term. It's still a work in progress. I think almost everyone from "expert" to novice is finding the current crisis difficult to navigate and formulate strategy to deal with. My own approach, is to do as little as possible in an uncertain environment and maintain the status quo until the dust settles.
I'm guessing they still don't do trust accounts, but I'll check since I'm looking for some new options for a different trust that I'm a trustee on.
Thanks for mentioning them.
Apparently they now do allow accounts titled as trusts but with restrictions. You cannot open a new account titled as a trust, you can only re-title an existing individual or joint account to a trust. That's an unusual policy. And the only kind of trust they allow is a revocable living trust. So both of those requirements rule out what I need in my case.
Back to the hunt!
Managing trust accounts sucks. I don't recommend them except in very limited circumstances. Although the legal costs of administering them is much more than you will be led to believe, and the initial cost of preparing the trust is just the beginning of the costs you will have down the road, it is far from the only cost. There is a very big opportunity cost as well as other costs. If a lawyer is trying to push you into doing a trust, get at least one more opinion (preferably from a lawyer who hates trusts). The return on investment for many is dubious.
That's called an informal trust.
Formal and informal trusts each have their pros and cons. But the short answer as to why use a formal trust is that there are things you can do with a formal trust that you can't do with an informal trust.
Both of them are more difficult to manage than a standard individual or joint bank account, and both have a higher cost. But the cost of a formal trust is much higher.
The cost of an informal trust, other than the extra administration time, is primarily an opportunity cost in that some investment choices aren't available to the informal trust arrangement. Anything that limits your investment opportunities has an opportunity cost associated with it. You can't, for example, list beneficiaries on a non-IRA/retirement stock brokerage account unless it's titled in the name of a formal trust.
When it comes to bank deposits, while both have an opportunity cost, the formal trust opportunity cost is much higher as many more institutions do not allow establishing accounts titled in the name of a trust then do not allow the use of an informal trust. So you may have to take a lower interest rate, for example, because the higher interest rate paying institutions don't allow you the title accounts in the name of a formal trust.
One of the benefits I like about AMEX Savings is that there are no ACH limits for transfers.Edit: I see now you already researched this.