Barclays Raises 5-Year and 4-Year CD Rates

Barclays increased the rates on its 5-year and 4-year CDs. Most noteworthy is the new 5-year CD rate increase. The yield went up by 10 basis points to 2.25% APY. The 4-year CD rate went up by 5 basis points to 1.70% APY. There is no minimum balance to open. These rates are accurate as of 4/3/2014. The last rate bump at Barclays was in January. Thanks to DA member OldGuy for reporting on this news in the forum.

Barclays’ long-term CDs used to be great deals due to a small early withdrawal penalty (EWP). That changed last year when the EWP went up from 90 days of interest to 180 days for terms over 24 months. However, the 180-day EWP for long-term CDs is still reasonable. Also, it should be noted that this new EWP was NOT retroactive. It did not affect existing CDs.

Not all CD changes have been negative. One is a policy change regarding interest disbursement. When Barclays first started offering online CDs, it did not allow interest disbursement. Now you can receive an interest disbursement from your CD on a monthly basis. You have the option to keep interest in your CD account or transfer it to another account (either the Barclays savings account or a verified external account).

Another nice thing about Barclays is that it clearly gives customers the right to make an early withdrawal. According to Barclays CD terms and conditions document:

You may, subject to an early withdrawal penalty, make withdrawals of principal from your CD Account before maturity

Some banks include wording that suggests the customer can only make an early withdrawal of principal if the bank approves.

One downside with Barclays is that they do not offer IRA CDs.

When I opened a Barclays CD, the application process was simple and smooth. One of the nice features of the application is the ability to designate beneficiaries which will make an account a Payable on Death (POD) account. No social security number was required for the beneficiaries. Another nice feature of the application process was the funding. I chose an ACH transfer to fund the CD, and it went smoothly. 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. You also have the option to mail in a check to fund the CD.

Barclays Online Savings Account

Barclays also has a good deal on its online savings account. It has a competitive rate of 0.90%. Since the savings account was launched in March 2012, there has been only one rate cut. That happened on May 16, 2013 when the yield went down from 1.00% to 0.90%. The online savings account has several nice features such as no minimum balance requirement and no monthly fees. Barclays also has a nice ACH transfer system. I have more details on its ACH system in this blog post.

Bank Overview

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 grade at DepositAccounts.com of A+ with a Texas ratio of 4.76% (excellent) based on December 2013 data. Please refer to our financial overview of Barclays Bank Delaware for more details. The bank has been a FDIC member since 2001.

How the Barclays 5-Year CD Rate Compares

Barclays’ new 5-year CD rate is very close to the national rate leader. That rate leader as of 4/3/2014 is CIT Bank which has a 5-year Jumbo CD with a 2.30% APY. One big advantage of Barclays is that its early withdrawal penalty is half that of CIT Bank. You can see the benefit of this by comparing these two CDs in our Early Withdrawal Penalty Calculator. I pre-filled the table with these two CDs. As you can see, the Barclays CD has a higher rate for any early closure. For example, if the CDs are closed after 2 years, the effective yield of CIT Bank’s Jumbo 5-year CD would be 1.15%. The effective yield of Barclays’ 5-year CD would be 1.69%. That’s a higher rate than any 2-year CD that’s nationally available.

To search for the best nationwide CD rates and the best CD rates in your state, please refer to the CD rates section of DepositAccounts.com.

Time to Replace an Old Barclays CD?

This type of question will likely be more common in the future. If you opened a Barclays 5-year CD last year that had only a 1.70% or 1.85% APY and a 3-month EWP, you may want to consider breaking the CD and using those funds to open this new CD. You can use our Keep or Break a CD Calculator to see if it's worthwhile for you. For example, if you had opened a 1.70% 5-year Barclays CD with $10,000 in January 2013, and you replaced it with the current 2.25% 5-year CD, you'll have almost $172 more money in 45 months (when the original CD would have matured) if you break the CD.