CD Rate Hike at Barclays - Review of Barclays Online CDs
As I mentioned last Friday Barclays raised its 5-year CD APY from 1.70% to 1.85%. It's now on top for internet banks, tied with CIT Bank's 5-year CD (but this CIT Bank rate requires a $100K minimum deposit). You can get a little higher 5-year CD rate at a few credit unions and small banks, but the Barclays CD has the nice feature of a small early withdrawal penalty of 90 days of interest. This is just a little larger than Ally Bank's 60-day EWP. Since Barclays 5-year is now 26 bps higher than Ally Bank's 5-year CD, Barclays' CD is a better deal even if it's closed early starting from year one to until maturity (unless you can get Ally's loyalty renewal bonus). I compared these two CDs for early closures in this post. As I explained in the post, there are always some risks when you rely on early withdrawals of CDs.
Update 5/10/13: Barclays now allows CD customers to receive interest disbursements. According to Barclays' FAQs, "you can receive an interest disbursement from your CD account on a monthly basis. You have the option to keep interest in your CD account or transfer it to your Barclays Online Savings account or a verified external account."
Update 5/10/13: Barclays has increased its early withdrawal penalty for terms over 24 months. It's now equal to 180 days of interest on the amount that's withdrawn.
One downside with Barclays CDs is that you cannot receive interest disbursements. No withdrawals of interest or partial withdrawals are allowed. A withdrawal will close the CD and you'll be charged 90 days of simple interest.
Another downside is that IRA CDs are not available.
On the plus side, Barclays allows Payable on Death (POD) accounts. In the application you can specify beneficiaries. Once beneficiaries are named, your account is a POD account. All beneficiaries are assigned equal beneficial interest. Only the names of the beneficiaries are required in the application.
More account details are listed in Barclays FAQ section and in the online terms and conditions document.
I wasn't able to find certain details online, so I tried calling Barclays yesterday at 6:00pm ET. According to the website, customer service is available M-F from 8am to 8pm ET. After 30 minutes of waiting for a CSR, I gave up. I tried again this morning soon after 8am, and I was able to get through in less than a minute. I was told they received many 1099-related questions yesterday which overloaded them.
According to the CSR, the CDs can be funded by ACH transfer or by mailing a check. If funded by ACH, they use a trial deposit system to verify the external account. Two small deposits will be made to the external account. No withdrawals are done. External account can be a checking or savings account.
At maturity and for 14 days during the grace period, you can call and request that the funds be transferred back to your funding account via ACH. You can also request to have the funds transferred to your Barclays savings account.
Barclays Online Savings Account
It has been almost one year since Barclays launched its online savings account. During this time, the yield has remained at 1.00%. I first reviewed the Barclays savings account in March 2012. The account has several nice features such as no minimum balance requirement and no monthly fees. Barclays also has a nice ACH transfer system. I asked the CSR a few questions about it today. Here are a few details I was told:
- The funding account link is maintained for future transfers so you don't need to re-verify the account after the account is opened
- They allow up to 3 external account links per owner
- After the account is opened, ACH transfers are limited to $250,000 per transaction. There are no limits for the initial account funding.
The Barclays internet bank is part of Barclays Bank Delaware which is a FDIC member (FDIC Certificate # 57203). The bank is best known in the U.S. for partnering with companies in offering co-branded credit cards. It's part of the U.S. division of Barclays, a British multinational megabank.
Barclays Bank Delaware has an overall health score at DepositAccounts.com of 5 stars (out of 5) with a Texas ratio of 5.28% (excellent) based on September 2012 data. Please refer to our financial overview of Barclays Bank Delaware for more details. The bank has been a FDIC member since 2001.
How This CD Rate Compares
The best nationally available 5-year CD rate is 2.05% APY at Citizens State Bank in Florida. The highest at an all-access credit union is 2.00% APY at Mountain America Credit Union (This is also available as an IRA). These rates are accurate as of 1/29/2013.
To search for nationwide CD rates and CD rates in your state, please refer to the best CD rates section of DepositAccounts.com.
Edit 7:45pm: Added additional beneficiary details.
helpful and excellent review.
Dear Mr Tumin,
Most of the bonds (Treasuries, Corporate, Junk and even Sovereign) have moved down in last 5/6 days. Correspondingly the yields have risen a little.
If this downtrend continues for another 2/3 weeks, then we are expected to a small rise in Mortgage Rates, which most likey will be followed by rise in Certificate/CD interest rates.