Update 8/9/13: This custodial CD special is no longer available.
Another CD with a top rate is being offered through the custodial CD program of Jumbo CD Investments, Inc. It’s similar to the CD that I reviewed in June. On the plus side, the rate is higher, but the early withdrawal penalty is much more severe. This new CD has a 2.63% rate (as of 8/2/13) for a 10-year term. It’s important to note that this rate is subject to change daily until the bank has received your funds via a wire transfer. Minimum deposit is $100,000. The early withdrawal penalty is 42 months of interest.
This custodial CD is nationally available, and compared to other nationally available CDs, it’s a clear rate leader. As of 7/15/2013, the highest CD rate that doesn’t require an active checking account is 2.00% APY for a 5-year CD at Salem Five Direct. Longer terms don’t offer higher rates. For CDs with terms over 5 years, the highest rate is 2.00% APY for a 10-year CD at Apple Federal Credit Union. The highest at an internet bank is 1.90% APY for a 10-year CD at Discover Bank.
Another CD option is a brokered CD. At Fidelity, there are currently call-protected 10-year brokered CDs with a rate of 2.90%. The downside with brokered CDs is that if you want to receive the CD funds early, you can’t make an early withdrawal. Your only option is to sell the CD on the secondary market, which could result in a significant loss in principal if rates have risen.
This custodial CD isn’t the typical type of CD that you get from your local bank or credit union. You have to go through the custodian bank. For this case it’s Sauk Valley Bank & Trust (FDIC Certificate # 35131). The underlying bank does not accept CDs from individuals directly. They only open up institutional CDs. That's the reason for the need to do the CD through Sauk Valley acting as your agent. The underlying bank is also a FDIC member, and the CD will be FDIC-insured by the underlying bank (assuming you keep the amount under the FDIC limit). Unlike the typical brokered CD, you can’t sell this on the secondary market if you need to redeem the CD early. The underlying bank will charge you a 42-month early withdrawal penalty.
This CD is available for both personal and business accounts. Joint and trust accounts can also be established and used to increase the amount that is FDIC insured.
This CD offering is available through the CD placement service, Jumbo CD Investments, Inc. Chris Duncan from Jumbo CD Investments reached out to me to promote this deal. Since it's a good deal, I decided to help promote it.
Chris Duncan has worked for Jumbo CD Investments since 1999, and over the years Chris has often shared his CD experiences at DepositAccounts.com and at my Bank Deals blog before DA. You can learn more about Chris and Jumbo CD Investments at their About-Us page.
Chris provided me the steps that you’ll go through if you’re interested in this CD:
- Review the CD offer at Jumbo CD Investments at this link, and complete their contact form.
- Jumbo CD Investments will send you a custodial agreement and a new customer form from Sauk Valley Bank & Trust. Jumbo CD Investments will also provide you information on the underlying bank. You’ll be able to confirm that this bank is a FDIC member. You can also use DA’s Bank Health Ratings page to check on the bank’s financial health.
- Fax the completed custodial agreement and new customer form to Jumbo CD Investments or Sauk Valley Bank & Trust along with your w-9 and an authorized signer resolution.
- Place your order with Jumbo CD Investments and wire transfer your funds to Sauk Valley Bank & Trust to purchase your FDIC-insured CD.
- Sauk Valley will wire funds on your behalf to the bank offering the CD
- You will get a confirmation of your CD from Sauk Valley
- Sauk Valley will either mail you your monthly interest or they can directly deposit it into another bank account
- When the CD matures or is closed early, you can choose to have the principal and interest wired back to your own bank without any fee.
When I wrote about the June custodial CD, a long-time reader looked into the offer and commented about his experience. Below is an excerpt from his comment:
When you contact Chris, he will send you via e-mail many items about his firm's background, his resume of experience in this business line, several other bank specific agreements, etc. My impression is that Chris is very good at what he does, has been doing it for several years and it may warrant our review.
You can read his entire comment and the comments of other readers about the June custodial CD in this blog post. These comments also include Chris’s answers to readers’ questions and concerns.
If this current custodial CD is of interest to you, check out the Jumbo CD Investments’ special page and click on the "Get Started" button. From there you can contact Chris and learn more about the CD details. Also, feel free to ask questions in the comments of this post. Chris will be happy to answer your questions.