Banks often don't make it easy to close a CD at maturity. They hope you'll let the CD automatically roll over. If you want to close the CD when the CD matures, you sometimes have to jump through hoops. This problem isn’t just confined to banks. Credit unions can also have issues. That’s the case a DA reader experienced with State Employees Credit Union of Maryland (SECU). He emailed me the issues he had when he tried to have his CD closed at maturity. It reminded me of the issue a reader had when she tried to close a CD at Discover Bank in 2011. Customer service representatives often make mistakes when you give them CD closure instructions. These mistakes can cost you money and require a lot of work to correct. Below are excerpts of the DA reader’s emails in which he described the CD problems he had with SECU:
It's almost embarrassing how mundane this situation is, but it shows what a time, energy, and money suck it can become when a financial institution neglects the basic blocking and tackling of customer service. The story boils down to simple compounded ineptitude in following simple instructions for closing a CD at maturity:
My wife and I each have 5-year CDs at SECU maturing on March 11 and 13. Since SECU's primitive online account access provides no capability to set or display CD maturity options (as so many others do, such as PenFed), I called on Feb. 25 to request that the CDs be closed at maturity and the balances transferred to share savings or checking accounts. After at least a 20-minute wait, I was connected to a CSR who didn't seem to know what he was doing. That should have immediately raised a red flag, but I went ahead anyway with the requests. He kept going away for a minute or so at a time as if he was consulting with someone else and then apparently completed the transaction. Since I wasn't very confident in his ability, I specifically asked him to reiterate that we had requested that the CDs be closed AT MATURITY and the balances transferred as instructed. The total time on the phone for this totally trivial and routine request was roughly 40 minutes.
A couple of days later, I logged into my account and was astonished to see that the CDs had been prematurely closed with interest credited as of the 25th, thus cheating us out of over 2 weeks of interest at 4%. If these had been minimal balances, I might have considered the lost interest to be the cost of doing business with these bozos (at least there was apparently no early withdrawal penalty to add insult to injury), but these are 6-figure balances, so the interest was several hundred dollars. After another 20+ minute wait on hold, I reached another CSR, [name removed], who promised to reverse the bogus transactions and call me to confirm that it had been done within 2 business days, which would be no later than Tuesday, March 4. Total time wasted on the phone was now about 90 minutes.
As luck would have it, Monday was a snow day in the region, so I allowed one more day for something to be done, but heard nothing from [name removed] by Wednesday, so I called yet again. After a third 20+ minute wait on hold, I reached another CSR, [name removed], explained that nothing had been done and asked for a supervisor. Although I didn't get to speak to the supervisor, she assured me that she had discussed it with someone, it would get fixed, and she would call me back within an hour. Naturally, I heard nothing further until she called me near the end of the day to say they were still working on it and she would call me within a day to confirm the result. Of course there was no return call, so I logged into my account and determined that the CD withdrawal had been reversed and credited back to the account as of March 6.
At this point, we're now down to a best-case scenario of 8 days of lost interest, assuming they don't find any more creative ways to screw up the maturity processing. With these balances, it's still a couple of hundred dollars, however.
Here's the latest update:
Exactly as predicted, they credited interest at maturity last night on the first CD, minus the time the balance was out of the account, thus owing over $100 in lost interest. It also shows the CD being rolled over to 2019. Based on past experience, this is how they handle cash outs at maturity. Also based on past experience, however, they can also lose the request to cash out and I then have to go to the branch to get them to fix it.
I’ll update this post once the DA reader reports that SECU has corrected the problem. Both banks and credit unions should have a well defined and easy process to close CDs. Unfortunately, that’s often not the case, and if you don’t get a well-trained CSR, mistakes can happen, and those mistakes can be difficult to correct.
The first general tip for any bank is to make sure you follow up with customer service especially if you don't have anything in writing. When you do speak with a customer service representative, try to record the name of the rep and the date and time of the call. Ask for a letter or email confirmation of your instructions. If you don't receive the written confirmation, make sure you follow up with another call. If you don’t follow up, your CD may not be closed which could cause it to be automatically renewed into a new CD. If you don’t notice this until after the grace period, you may have to pay an early withdrawal penalty to get your money. As this SECU case shows, the CSR may close the CD incorrectly before maturity which can cost you in lost interest or an early withdrawal penalty.
The second general tip for any bank or credit union is to be very careful about specifying when your CD is to be closed. In this SECU case and for the 2011 Discover Bank case, I don't know how customer service could have assumed the customer wanted to close the CD early when it was going to mature in just a few weeks. You can't assume the CSR will act with common sense. The reader who had the Discover Bank issue provided the following tip for others when they instruct their bank to close a CD:
for any and all correspondence to include directions that specify "upon maturity" in bold lettering, and to not be reluctant to repeat the instructions, when closing a CD.
Hopefully, SECU will improve their procedures to ensure this problem doesn't happen again. Also, I hope they make it easier for members to close CDs.