About Ken Tumin

Ken Tumin founded the Bank Deals Blog in 2005 and has been passionately covering the best deposit deals ever since. He is frequently referenced by The New York Times, The Wall Street Journal, and other publications as a top expert, but he is first and foremost a fellow deal seeker and member of the wonderful community of savers that frequents DepositAccounts.

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Issues and Tips on Closing CDs at Dime Savings Bank & Other Banks


Banks always seem to make it easier to open a CD than to close a CD. They always hope customers will let their CDs automatically renew into another CD. For CD customers this is rarely a good choice. If you let your CD roll over into a new CD, the new rates will likely be much lower than if you had shopped around for a new CD. This is especially true when you take advantage of CD specials. Typically, CD specials will renew into standard CDs with much lower rates.

So before you open a CD, it's always a good idea to know what will be required to close a CD and receive the funds. This is especially important for internet banks and when you live far away from the bank branches. If you can't come into a branch, some banks will require written instructions to close a CD. Also, the bank may only offer to mail a check for sending you the money. Wire transfers and ACH transfers may not be options.

A reader was kind enough to email me about the problems he has been having trying to close an IRA CD at Dime Savings Bank. This was the hot 15-month IRA CD that I reviewed on March 2010. The reader provides important warnings that should be very helpful for those who also opened this IRA CD. Below is an excerpt from his email:

Many of your readers, including myself, opened IRA CD accounts at Dime Savings Bank after reading on Bank Deals Blog about their special offers in March-April the past couple of years.

Now, those of us who opened accounts in 2010, including myself, are having their 15-month CDs come due.

You might want to warn your readers that, as I discovered this morning, closing the account is nearly as much of a hassle as opening it.

There is paperwork to be done: a form must be mailed (not faxed) to you by them, and mailed back after signing. Thus, if you live in an outlying part of the country and wait until your maturity date to phone them regarding closing the account, it will certainly be at least a week, maybe longer, before you see your funds. You won't earn interest during that time, and there is the possibility that your paperwork will arrive back in Brooklyn after the ten-day grace period, thereby causing your CD automatically to renew at an unfavorable rate.

The maturity notice that they mail a month ahead of time makes absolutely no mention of this paperwork process, and gives no warning that one should contact them well in advance of maturity if one wants to close the account on the maturity date.

If you have any tips for closing Dime Savings Bank IRA CDs, please leave a comment. Dime Savings Bank has also offered (and still does) competitive rates on regular CDs. If you have experience closing these CDs, please let us know if there are similar paperwork requirements.

IRAs frequently require more paperwork than non-IRAs, and you have to be careful when you close IRA accounts to ensure you don't get hit with tax penalties. The reader also provided a useful tip for closing IRAs:

you have to be especially careful to make sure the bank completes the paperwork properly if you are taking your money out as a standard (or normal) distribution with the intention of rolling it over elsewhere within 60 days. I've had banks inadvertently check the "Minimum Required Distribution" box on account closing forms. If not not caught, this could cause serious issues with the IRS at tax time as the withdrawal would have to be declared as income.

One way to simplify closing regular CDs is to open a checking or savings account at the institution that holds your CD. If your CD is at a credit union, you should already have a savings account at the credit union. When the CD matures, I've usually been able to just call the institution and instruct the customer service rep to close the CD and transfer the money into the liquid account. Once it's in the liquid account, I can withdraw the money using another bank's ACH transfer service. If it's a checking or money market account, you can also write a check to deposit the money into another account. The only issue that I have experienced with this strategy is when credit unions don't allow ACH debits from their savings accounts. This happened to me when I tried to pull funds from my Navy Federal savings account.

Related Pages: CD rates, IRA rates

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Previous Comments

  |     |   Comment #2
Yesterday i went to the Dime Savings bank in Sunnyside Queens, the 15 month 2.5 % IRA that i had opened matured.

The best rate they are now offering is a seven  (7) year 3 %, IRA. I am over 70, so i can take a distribution of any amount once every year without penalty. Of course any distributions are taxable. In my case because of my age this is a very good deal.

The rollover process just took 5 minutes, because the funds were kept at the same bank
  |     |   Comment #3
I recently rolled over my 15 month Dime IRA to a local bank. About a week before maturity I filled out transfer docs at my new bank. The instructions on the transfer form were to close the Dime IRA at  maturity. My new bank mailed the forms to Dime and they received the forms a few days before maturity. On maturity day, Dime mailed a check to my new bank and also sent me a letter confirming that the check had been sent. Everything went smooth. The trick is to get Dime the transfer docs before maturity date.
  |     |   Comment #4
Ken, I think you are incorrect about one thing in your post. If you are closing an IRA CD and are going to take the funds and use the 60 day rollover to deposit it in an IRA at another institution, the bank will issue a 1099R and include the amount in the taxable gross distribution box. When you file your tax return, it is incumbent on you to include this amount and an offsetting amount from the new IRA. They cancel each other out on the tax return and, consequently, you do not pay any tax. So from the example you used, the bank actually did the right thing.
  |     |   Comment #5
Actually, I just re-read your post and now see that you may be referring to something else. A minimum required distribution is for people who are older than 70.5. However, I don't see a box in the 1099R for that purpose.
  |     |   Comment #7
Ken, a box is checked if you're older than 70.5 on the 5498 form they issue every year for an IRA. I suppose it could be a problem because the IRS would be looking for you to pay your taxes on a RMD. However, it is a separate issue not related to the distribution of the funds from the closed IRA account. That amount would still be reported on your tax return and offset with any amount you rolled over to a new IRA.
  |     |   Comment #8
Lou, yes, Ken's quote from a reader about the bank checking the RMD box (without your instructions otherwise) was an important point. If the bank checked it and the payout was made - too late. You can't roll it over and you must pay income taxes. Part of the 2010 Tax Relief Act allows for a "qualified charitable distribution" in 2011 if you donate your RMD to charity. Then you wouldn't have to pay the tax, but I'm not sure if it can be done after the fact (i.e., after  you receive the check from the bank). Anyone know?

Re Dime Bank CD: I luckily called Dime ahead of time and was also surprised about their snail-mail method. I requested the forms to be sent to me "just in case" and made sure that doing this didn't lock me into closing the CD at maturity. As it turned out, I decided to roll over to their long term IRA CD like Anonymous #2 since I am over 70 1/2.

On the plus side, Dime's paperwork processing system is very quick. And I always like their CSRs.

ALWAYS call the bank (any bank) as soon as you receive the maturity notice and find out all the details. It's up to you.
  |     |   Comment #9
Jeanne, I am not sure what you mean by, " If the bank checked it and the payout was made - too late."  What do you mean by "too late"? Are you saying the CD owner did not meet the 60 day test? The 60 day time period does not start until the CD owner receives the distribution from the bank.
  |     |   Comment #10
Lou, please read the second quote in Ken's article. We were talking about the Required Minimum Distribution (RMD) for IRA CDs. On the form for a distribution/rollover, there is sometimes a box that says something like, "Send a check for the RMD." If you don't notice that the bank filled in the box, and they send you a check, you may not "put it back into the mix" no matter the timeline. This happened to me once by Wells Fargo. After that, I was very careful.
  |     |   Comment #11
Jeanne, I don't want to contradict you, but if you rollover the mistaken RMD within 60 days back into the original or a new IRA account, you should be fine as along as the Bank corrects the mistake and sends an accurate 5498 form to you for that year.
  |     |   Comment #12
Contacted new IRA trustee to request the Dime IRA CD at maturity date be sent to that new trustee.  Paperwork was done (I was requested to mail to Dime) and the transfer took place.  I was surprised when receiving a statement that a $25. service charge was deducted from the CD maturity amount by Dime.  I called Dime and was told this is always done if a transfer is made directly vs. mailed to a new trustee.  Nothing discussed prior to maturity earlier mentioned that service fee.  Ben 

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