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Banking 101: Annuity vs CD - How Do They Compare?Review of GMAC Bank and its 2-Year CD - Nationally Available
POSTED ON BY Ken Tumin
Update 4/14/09: The 2-year CD rate has fallen to 2.90% APY. Please check GMAC Bank's website for the latest rates.
GMAC Bank lowered its 12-month CD rate on Friday, but it kept the 2-year CD rate at 3.10% APY which is a top 2-year CD rate for banks. Typically, GMAC Bank changes rates on Fridays so this should last at least through next Thursday.
GMAC Bank's FAQ page does a pretty good job describing the CD details. Some things to note include:
Another important note is how CDs are opened at GMAC Bank. A reader in my previous post commented that GMAC Bank delayed opening the CD for two weeks and would not honor the rate that was listed at the time of the application. As mentioned above, the rate may not lock at the time of the application. CDs are opened the fastest if you use funds from your GMAC Bank savings or money market account.
I've had good luck opening GMAC Bank CDs using funds in my GMAC Bank money market account. The online application gave me trouble on the last CD, but I was able to resolve the issue by phone.
GMAC Bank does not offer IRA accounts, but they do allow custodial and other legally titled accounts. The online application instructs you to call for assistance for these. I don't think the online application allowed you to specify multiple POD beneficiaries, but you can send instructions to GMAC to add this to the account.
Like the CD rates, GMAC Bank has recently lowered its money market and savings account rates. But they remain fairly competitive: 2.25% APY for the Online Savings Account and 1.90% APY for the Money Market Savings Account as of 3/30/2009. GMAC Bank continues to be my favorite online bank due to its ACH bank-to-bank transfer service (see my latest OSA review).
GMAC Bank's Future?
GMAC Bank's parent, GMAC Financial Services, has been hurt with big losses in both its mortgage and auto loan businesses. With the latest news of the US government starting to pull back on the GM bailouts, GMAC's auto loan business may not improve any time soon. In late December, the Federal Reserve allowed GMAC to become a bank holding company. GMAC then received $5 billion from the Treasury Department's bailout fund.
There had been worries early last year when there was the possibility that the FDIC may terminate GMAC Bank's FDIC status due to GMAC's special status as an industrial loan company. But last July GMAC received a 10-year waiver from the FDIC. With GMAC now a bank holding company, the 10-year waiver may not even be relevant.
If GMAC goes bankrupt, what happens to GMAC Bank? It may not mean a bank failure. When Lehman Brothers filed for bankruptcy last year, Lehman Brothers Bank continued to operate (see post)
If you stay below the FDIC limits, there's not much to worry about. GMAC Bank deposit accounts are FDIC insured (FDIC Certificate # 57803).
Other High Certificate of Deposit Rates
This 2-year CD rate at GMAC Bank is a top rate for banks, but you can still get a higher rate at some credit unions. I have a few credit unions with higher rates and with easy membership in my weekly rate summary. Many of the best CD deals are only locally available. To find the best deals in your state, refer to the index of state CD and bank deals.
GMAC Bank lowered its 12-month CD rate on Friday, but it kept the 2-year CD rate at 3.10% APY which is a top 2-year CD rate for banks. Typically, GMAC Bank changes rates on Fridays so this should last at least through next Thursday.
GMAC Bank's FAQ page does a pretty good job describing the CD details. Some things to note include:
- Minimum deposit is $500
- CD can be opened online or by phone
- CD can be funded by ACH electronic funds transfer or by check
- If funded by check, rate does not lock until check is received
- Early withdrawal penalty is 180 days of interest for terms over one year, 90 days of interest for shorter terms
- 10 day grace period at maturity in which you can close CD without penalties
- Interest can be posted monthly, quarterly, semi-annually or annually
Another important note is how CDs are opened at GMAC Bank. A reader in my previous post commented that GMAC Bank delayed opening the CD for two weeks and would not honor the rate that was listed at the time of the application. As mentioned above, the rate may not lock at the time of the application. CDs are opened the fastest if you use funds from your GMAC Bank savings or money market account.
I've had good luck opening GMAC Bank CDs using funds in my GMAC Bank money market account. The online application gave me trouble on the last CD, but I was able to resolve the issue by phone.
GMAC Bank does not offer IRA accounts, but they do allow custodial and other legally titled accounts. The online application instructs you to call for assistance for these. I don't think the online application allowed you to specify multiple POD beneficiaries, but you can send instructions to GMAC to add this to the account.
Like the CD rates, GMAC Bank has recently lowered its money market and savings account rates. But they remain fairly competitive: 2.25% APY for the Online Savings Account and 1.90% APY for the Money Market Savings Account as of 3/30/2009. GMAC Bank continues to be my favorite online bank due to its ACH bank-to-bank transfer service (see my latest OSA review).
GMAC Bank's Future?
GMAC Bank's parent, GMAC Financial Services, has been hurt with big losses in both its mortgage and auto loan businesses. With the latest news of the US government starting to pull back on the GM bailouts, GMAC's auto loan business may not improve any time soon. In late December, the Federal Reserve allowed GMAC to become a bank holding company. GMAC then received $5 billion from the Treasury Department's bailout fund.
There had been worries early last year when there was the possibility that the FDIC may terminate GMAC Bank's FDIC status due to GMAC's special status as an industrial loan company. But last July GMAC received a 10-year waiver from the FDIC. With GMAC now a bank holding company, the 10-year waiver may not even be relevant.
If GMAC goes bankrupt, what happens to GMAC Bank? It may not mean a bank failure. When Lehman Brothers filed for bankruptcy last year, Lehman Brothers Bank continued to operate (see post)
If you stay below the FDIC limits, there's not much to worry about. GMAC Bank deposit accounts are FDIC insured (FDIC Certificate # 57803).
Other High Certificate of Deposit Rates
This 2-year CD rate at GMAC Bank is a top rate for banks, but you can still get a higher rate at some credit unions. I have a few credit unions with higher rates and with easy membership in my weekly rate summary. Many of the best CD deals are only locally available. To find the best deals in your state, refer to the index of state CD and bank deals.
Investors should stay within the old FDIC insurance limitations when buying a CD that matures after 1/1/2010
here is an example of some nationwide bank rates
Rates with a * signifies this bank rate is available nationwide.
Florida Central Credit Union
6.01
FL
First Robinson Savings Bank*
6.01*
IL
Connexus Credit Union*
5.15*
WI
Keystone Bank*
5.15*
AL
Community Bank of Pleasant Hill*
5.01*
MO
Three Rivers FCU
5.01
IN
Union State Bank/Bank of Atchison*
5.01*
KS
Beacon Federal Credit Union
4.51
TX
Communications Federal Credit Union*
4.25*
OK
First New England Federal Credit Union
4.15
CT
Nate