Long Distance Travel for Trip-Worthy Bank CDs

Several readers through out the years have described to me the long trips they have made to open a bank account that's a hot deal. Some have flown across the nation to open the account. The banks offering these accounts are the ones that require a branch visit, but they do not require new customers to be local residents. They don't care what state you reside in.

The bank account that gets the most attention is the CD. Unlike a savings account or reward checking account, the CD provides a guaranteed rate for the term of the CD (unless the bank fails).

One important issue to consider is that the bank's policies on who is eligible to open an account can often change based on management's decisions. That's why I'm hesitant to put too much faith in what a CSR tells me. The CSR could be wrong, or management may change their policy if they're seeing too much demand. Thus, it's important to verify before you make a long trip that the bank office will open a new account for someone who isn't a local resident, and it's a good idea to also verify this with the bank's management at that branch. Of course, it's also a good idea to verify that the CD rate hasn't fallen. The higher the rate, the greater the chance the rate will soon be falling.

Another issue to consider is the cost of the trip. The cost to drive or fly and to stay in a hotel can quickly eat up the financial benefits of the CD. However, if you make part of the trip a vacation, that can help justify some of the cost.

Poll Question

That leads me to the poll question of the week: What's the longest trip you have made to open a bank account?

For the comments, did the trip turn out to be worthwhile? Were there any complications with opening the account?

Current Example of a Trip-Worthy CD

One specific type of CD that attracts attention is the add-on CD that allows unlimited deposits during the term of the CD. This can make for a useful insurance policy when interest continue to fall. When your other CDs mature, you can always fall back to the add-on CD.

It's rare to find banks offering add-on CDs that don't restrict the amount of add-on deposits. Many restrict add-ons to be no more than the initial deposit. That makes the CD a little better than the average CD, but it's not nearly as useful as those with unlimited add-ons.

There is a potential downside to an add-on CD. The bank may change their add-on policy during the term. The question of whether a bank is allowed to make such a change is controversial. Banks and credit unions have done it in the past. In one example, customers were able to get the policy reversed.

One add-on CD that is still available is at Inter National Bank in Texas. When I first reported on this bank in early October, it was offering a 3.25% APY 5-year CD. The yield has recently fallen to 2.75% APY. However, this is still a good deal since they allow unlimited add-on deposits. Please see my CD review of Inter National Bank for more details.

Inter National Bank requires a branch visit to open an account. However, you don't have to be a local resident. A reader described to me how he made a trip to Texas for this CD. Before leaving he made sure to verify with the branch that they would indeed open the account for an out-of-state customer. He also turned the trip into a mini-vacation which helped justify the cost. Fortunately, he was able to lock in the 3.25% before the yield fell to 2.75%.

One problem with opening an add-on CD at an out-of-state bank is the issue of making additional deposits. In the case of Inter National Bank, you can't make electronic deposits into the CD. Your only choices are to deposit in person, by mail or a transfer from a liquid account that you have with the bank. This is where a savings or checking account can come in handy. By using a bank like Ally you can make an ACH transfer into the savings account. Once in the savings account, you can then make the add-on deposit into the CD. This can also be useful when the CD matures. Most banks make it easy to transfer funds from a matured CD into the checking or savings account at the same bank. This often can be done with just a phone call. Once in the savings account, you can than pull the funds with an ACH transfer from your other bank. This companion savings or checking account can be useful for managing a CD. However, there can be complications. You have to watch out for minimum balance requirements, withdrawal limitations and inactivity fees.

Does the term trip-worthy CD sound familiar? You might remember a similar term that became popular in the 90's.