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  2. GMAC Bank Increases CD Rates - New 4.10% 12-Month CD

GMAC Bank Increases CD Rates - New 4.10% 12-Month CD

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GMAC Bank increased the yield on its one year CD today from 3.90% to 4.10% APY. It also increased the yield on terms of 18, 24 and 36 months. All of the rate changes are shown below:

GMAC Bank CD rate changes as of 5/2/08:

TERM       OLD APY     NEW APY    BPS CHANGE
3 months    3.50%       3.50%       0
6 months    3.60%       3.60%       0
9 months    3.60%       3.60%       0
12 months   3.90%       4.10%     +20
18 months   3.70%       3.75%      +5
2 years     3.80%       3.85%      +5
3 years     4.00%       4.10%     +10
4 years     4.35%       4.35%       0
5 years     4.35%       4.35%       0

For more details about GMAC Bank and these CDs, please refer to my GMAC post from last week.

Last week GMAC made some substantial rate increases on its 4 and 5 year CDs. It's nice to see some more rate increases after Wednesday's Fed rate cut. As I described in this post, banks have been increasing their long term rates. Inflation and the expectation that it'll cause future rate hikes are part of the reasons. Perhaps GMAC is anticipating that rate hikes may happen sooner rather than later. Another reason for the CD rate hikes may be its need to raise cash (see news article).

GMAC Bank is FDIC insured (Certificate # 57803).

Thanks to the reader shrazzy who noted this CD rate increase in the finding-the-best-deals post.
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4 Comments.
Bill
Bill   |     |   Comment #1
Let's not lose sight of the fact that GMAC Bank is facing a November 2008 deadline for securing a waiver to allow them to continue FDIC coverage. I have to wonder what would happen to money tied up in a 12 mos CD in the (probably unlikely) event that GMAC Bank lost its FDIC coverage and failed. I currently have funds in their MMA, paying a much lower rate of interest. Their ACH is top notch and that's why I'm maintaining an account with them.
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Bill
Bill   |     |   Comment #2
I see that access to the WSJ article is limited. Here's a blog entry that covers the same ground as the article: GMAC's Bank Unit Has a Problem.
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Banking Guy
Banking Guy   |     |   Comment #3
I discussed this issue in my post from last week. Here's my post in which I discussed the details of this potential issue with the FDIC.
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Bill
Bill   |     |   Comment #4
Thanks, BG. Yes, I saw the previous post. But, 12 mos CDs taken out now will not mature until well after the November 2008 cutoff for GMAC Bank's obtaining an FDIC waiver to continue insurance. My concern is what happens to such deposits in the event that the bank is unable to obtain the waiver or otherwise resolve the issue. Logic would dictate that FDIC coverage would continue for the duration of the CD term, but I'd feel a lot more comfortable seeing that in writing.

Also, I wonder if the GMAC CD rate increases are not being driven by loss of MMA funds resulting from the negative WSJ publicity. I know I moved a chunk of money elsewhere, although in my case this was mainly due to their lowering interest rates.
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