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POSTED
ON BY Ken Tumin
We hear a lot of about hidden bank fees associated with ATMs and overdrafts, but there's another fee that savers have to worry about, and that's the penalty for early withdrawal of a certificate of deposit. The penalty for long-term CDs is typically six months of interest. However, the early withdrawal penalty at Chase Bank is much more severe.
If you had opened a 5% WaMu CD last year and that CD is new maturing as a Chase CD, it's important not to let it automatically renew. One reader just emailed me what happened to his friend:
If for some reason you forget to close the CD during the grace period and the CD automatically renews, you'll be liable for an early withdrawal penalty if you want to withdraw the funds. As the reader's friend found out the hard way, the penalty is much more than the usual six months of interest. According to Chase's disclosure (page 11), the early withdrawal penalty for a 12-month CD is as follows:
And the penalty may eat into the principal:
So if you miss the grace period, and you do an early withdrawal of the entire amount, you'll be hit with a very substantial penalty. For a $10K CD the penalty would be $325.
None of the current Chase CD rates are competitive. This is especially true with Chase's standard CDs. The 12-month CD rate for Texas is only 0.25%. If you want to close the CD and withdraw the money, refer to my following posts on this issue:
My experience closing the CD was in Texas in which the WaMu-to-Chase conversion had completed. In states in which the conversion hasn't yet completed, closing the CD may be more difficult. Based on the comments in these posts, Chase has not been consistent in the requirements to close CDs. I'm not sure if this varies by state, balance or CSR. Some commenters have reported not being able to close CDs with balances of over $50K by phone. However, others with over $50K didn't have a problem closing the CD by phone and transferring the money into their Chase checking account.
One thing that has been consistent is that you cannot do an ACH transfer out directly from the CD. Without a Chase or WaMu checking/savings account, your only options are having a check mailed or getting the proceeds in person at a branch.
Update on Chase Checking Account Bonus
If you are considering opening a Chase checking account to make it easier withdraw the CD funds, consider using their checking account promotion in which you can receive at least a $100 bonus. Chase just came out with a new $100 promotion (see post).
Other Competitive CD Rates
If you're looking for another CD to replace your old WaMu CD, refer to the following posts:
If you had opened a 5% WaMu CD last year and that CD is new maturing as a Chase CD, it's important not to let it automatically renew. One reader just emailed me what happened to his friend:
A friend of mine had a Chase/WAMU CD flip over. It used to be at WAMU. To cancel this Chase $100k CD, Chase wants $3k + $25. At the new interest rate of 0.20 for 12 months, that is a 15 YEAR interest penalty for cancelling the CD. I know of no other bank in the world that charges this.
If for some reason you forget to close the CD during the grace period and the CD automatically renews, you'll be liable for an early withdrawal penalty if you want to withdraw the funds. As the reader's friend found out the hard way, the penalty is much more than the usual six months of interest. According to Chase's disclosure (page 11), the early withdrawal penalty for a 12-month CD is as follows:
For terms of one year or more, the early withdrawal penalty is equal to $25.00 plus 3% of the amount withdrawn.
And the penalty may eat into the principal:
Early withdrawal penalties may require a reduction in the principal amount if the amount of accrued and unpaid interest on the deposit is less than the penalty.
So if you miss the grace period, and you do an early withdrawal of the entire amount, you'll be hit with a very substantial penalty. For a $10K CD the penalty would be $325.
None of the current Chase CD rates are competitive. This is especially true with Chase's standard CDs. The 12-month CD rate for Texas is only 0.25%. If you want to close the CD and withdraw the money, refer to my following posts on this issue:
- My experience closing a WaMu/Chase CD
- Issues to consider for those 5% WaMu CDs that are near maturity
My experience closing the CD was in Texas in which the WaMu-to-Chase conversion had completed. In states in which the conversion hasn't yet completed, closing the CD may be more difficult. Based on the comments in these posts, Chase has not been consistent in the requirements to close CDs. I'm not sure if this varies by state, balance or CSR. Some commenters have reported not being able to close CDs with balances of over $50K by phone. However, others with over $50K didn't have a problem closing the CD by phone and transferring the money into their Chase checking account.
One thing that has been consistent is that you cannot do an ACH transfer out directly from the CD. Without a Chase or WaMu checking/savings account, your only options are having a check mailed or getting the proceeds in person at a branch.
Update on Chase Checking Account Bonus
If you are considering opening a Chase checking account to make it easier withdraw the CD funds, consider using their checking account promotion in which you can receive at least a $100 bonus. Chase just came out with a new $100 promotion (see post).
Other Competitive CD Rates
If you're looking for another CD to replace your old WaMu CD, refer to the following posts:
