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4.30% 9-Month CD with Rate Bump Feature at FirstFedDirect - Nationally Available


FirstFedDirect just came out with a special 9-month CD with a yield of 4.30% APY. The minimum deposit is $10,000. There's an online application serviced by andera.com that allows funding by an ACH transfer from your existing account at another bank. You can also open by mail with a check. A beneficiary can be included in the application (see FAQ), but I'm not sure if the account title will be done as required for added FDIC coverage (see post).

This 9-month CD has an auto rate bump feature that's tied to the 10-year Treasury rate. If the 10-year Treasury rate goes up, your yield goes up accordingly. However, if the 10-year Treasury Rate goes down, your yield remains where it is. The yield is limited to 9.99%. Potential rate increases will only occur at the end of each calendar quarter.

For those worried about inflation forcing rates up, this seems like it could reduce the risk. I haven't reviewed the small print and the 10-year Treasury rates to see exactly how the rate bump works and the likelihood that it will be a worthwhile feature. The current yield of 4.30% APY is very competitive even without any rate bump feature.

I first reported on FirstFedDirect in December 2005 when it launched its Internet Advantage Savings Account. I no longer see this account listed on the website. However, it is listed in the online application. My last post on this savings account was in July 2006. This savings account could make closing the CD easier.

FirstFedDirect is an internet division of First Federal Bank of California. The online bank serves customers in all states other than California. For those in California, you have to bank with First Federal Bank of California, and fortunately, they are also offering this same 9-month CD special. I have more details in this post.

The bank is another California bank that has been hit hard by the mortgage mess. In my 2006 post of FirstFedDirect two years ago, the bank had a rating of 4 stars at Bankrate.com. It's now down to the lowest rating of 1 star based on 3/31/08 data. However, BauerFinancial gives it a higher rating of 3 stars (adequate). This is also based on 3/31/08 data. As I recommend with any bank, it's best to keep below the FDIC limits. The bank has been FDIC insured since 1935 (FDIC Certificate # 28536).

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Anonymous   |     |   Comment #1
I'm still going for the St. Louis Bank 6-month CD - 4.30%APY. I have the feeling that in 6 months rates will be much higher than 4.30%, so why lock myself in for 9 months if I don't have to.