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Custodial CD Special with a Competitive 10-Year CD Rate


Update 5/30/2014: The custodial CD rate has fallen from 2.50% to 2.35%.

A CD with a top rate is being offered through the custodial CD program of Jumbo CD Investments, Inc. It's a 10-year CD with a 2.35% interest rate (APR). Minimum deposit is $100,000, and it has a 9-month early withdrawal penalty. It’s nationally available, and compared to other nationally available CDs, it is competitive. As of 5/16/2014, the highest CD rate that doesn’t require an active checking account is 3.00% APY for a 10-year CD at MidFirst Direct, and that’s only available in certain states. Also, MidFirst Direct has much larger early withdrawal penalties. There are some 5-year rates with decent penalties that are close to this, but if you are at the FDIC maximum with those already, this could be a good alternative. To see how these CDs compare when you factor in the EWP, refer to our CD Early Withdrawal Penalty calculator.

This isn’t the typical type of CD that you get from your local bank or credit union. You have to go through a custodian bank. However, both the custodian bank and the issuing bank are FDIC members, and the CD will be FDIC-insured by the issuing 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 issuing bank will just charge you a 9-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.

I’ve always tried to share with you the best CD deals even when they’re not the typical bank CD. That’s the reason I’ve always included credit unions. I’ve also mentioned brokered CDs when they have offered higher rates. In this case, you can get a good rate especially if you are already at the FDIC/NCUA insurance limits on the higher rate institutions.

This CD will be held by an FDIC bank, but it won’t be purchased directly from the bank. You have to go through a custodian bank (which is also a FDIC member). The bank that issues the CDs doesn’t want to deal with retail deposits directly, and that’s the reason for the custodian bank.

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 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 give them a call
  • Jumbo CD Investments will send you a custodial agreement from the bank that will serve as the custodian. Jumbo CD Investments will also provide you information on the bank that will issue the CD. You’ll be able to confirm that both banks are FDIC members. You can also use DA’s Bank Health Ratings page to check on their financial health.
  • Fax the completed custodial agreement to Jumbo CD Investments along with your w-9 and an authorized signer resolution.
  • Place your order with Jumbo CD Investments and wire transfer your funds to the custodian bank to purchase your FDIC-insured CD.
  • Jumbo CD Investments will notify the bank and provide them with all of the setup documents.
  • This completes the CD opening process. You will receive a confirmation from the custodian bank.
  • After the CD is opened, interest can either be paid monthly via check or a direct deposit to another bank account (via ACH) from the custodian bank.
  • The custodian bank will send you monthly statements with no fees.
  • 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.

It's not common for this type of deal to be made available to retail investors. If this is interesting 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.

When I promoted a similar CD last year, Chris answered many questions in the comments. You can see those questions and answers in this blog post. One of those comments in that post came from a long-time reader, OCSteve who has spent many years in the banking industry. Below is an excerpt of OCSteve's comment from last year:

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 more of OCSteve’s comments here.

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Anonymous   |     |   Comment #1
vanguard has a 10 year cd for 3.35%
ChrisCD   |     |   Comment #2
Chris, here.  Just leaving a comment so that I am subscribed to the post. 

#1 - That is a really good rate.  Many people don't have or don't want to set-up a full-fledged brokerage account.  Also,  remember CDs through Vanguard or brokerages like it, don't have a fixed penalty to close.  The CD has to be sold, if you need or want your funds back early, and that could be at a loss greater than a fixed penalty, or if the market has dropped since you bought it, you could make a profit. 

If you don't ever close your CDs, that would be a better bet.  But if the cost to close that ends up equating to a 1-year penalty, it performs slightly better on the 2y (1.67% net).  If the close to close gets much higher, the 2.50% becomes a better bet.  It comes down to high fast and high you expect rates to rise in the future.  I'll leave that guessing game to others.  :O) 
Anonymous   |     |   Comment #13
Is it in writing that the 9 month withdrawal penalty is guaranteed not to change?
Are you sure they will let you withdraw the money when you want to?
Anonymous   |     |   Comment #14
And on top of that I would do the 2.25% ge cd before the 10 year 2.5% cd
Anonymous   |     |   Comment #16
actually there is a 2.3% cd at ge capital retail bank
ChrisCD   |     |   Comment #23
The bank signs the Sauk set-up information that acknowledges the penalty.
Anonymous   |     |   Comment #3
Who is the issuing bank...for 10 years that should be know before sending any $s to Sauk Valley Bank & Trust.
ChrisCD   |     |   Comment #4
You will be given all of that information once you have sent us a request via email from our site. We will provide you any background that you want on Sauk Valley and the name and FDIC# of the underlying institution.  You will not be wiring any $ to Sauk blind. 
Anonymous   |     |   Comment #6
The fourth step on your website provides...

Wire funds to Sauk Valley Bank & Trust

Perhaps I misread it...didn't see where in the process one knows the underlying/issuing bank
Anonymous   |     |   Comment #9
Wait! That's a real name? 
ChrisCD   |     |   Comment #10
Yes, the first step --
  Complete our contact form providing us your email address. We will only use that to send you the necessary information for the CD

The necessary information is the background on Sauk Valley Bank & Trust, the name of the underlying bank, and any other info you feel you may need such as the background on our company. 

You don't ever get to step 4 if you aren't satisfied with steps 1 -3.  :O)
Anonymous   |     |   Comment #5
Anonymous   |     |   Comment #7
RE:  "It's a 10-year CD with a 2.50% interest rate (APR)"

Is that a 2.5% APR or 2.5% APY ?
ChrisCD   |     |   Comment #12
It is a 2.50% APR.   Most of our clients receive monthly interest.  However, I believe if you don't want the interest it compounds monthly.  I need to confirm that though.  If it is monthly, the APY is 2.529%. 
Anonymous   |     |   Comment #8
For me it is not a good rate. I deducted taxes, inflation and 10 year dead money syndrome and it is a losing investment. Thanks, but it may be good for extreme conservative investors.
Anonymous   |     |   Comment #15

Can't you do any better?  Like 3% rate, low penalty.
I can get 3% but I don't like the penalty.
ChrisCD   |     |   Comment #17
I wish I could.  And we pointed out in the post that there are some higher 10-year rates, but the penalties are much higher as well.  It comes down to your point of view on where rates are going and how fast. 
Pablo   |     |   Comment #18
How about Apple FCU at 2.60% for 10 years?
Anonymous   |     |   Comment #19
i can get 3% for 10 years without any problem.
ChrisCD   |     |   Comment #21
I'm not sure why the board isn't picking-up that I am logged in, but what is the EWP on that?  If you aren't worried about closing the CD, yes the 3% is better.  If that is an option you want to retain, many 10-year CDs have larger EWPs.
Anonymous   |     |   Comment #22
All the CDs have varoius downfalls.  None of the ones posted are any good.  That's while I'm still on the side lines.  Sometimes it's better to just plain wait it out.
ChrisCD   |     |   Comment #20
Apple has a larger Early Withdrawal Penalty, 12-months.  From the aspect of potentially closing, the Custodial CD performs better.
Greg   |     |   Comment #24
Great post and very helpful to include Chris's deals.  However, it would be helpful, Ken and Chris, to include a summary -- even better, a direct quote -- of the issuing bank's policy on early withdrawals.   This CD  (high interest rate, low EWP) indeed seems a very good deal.  But longtime readers of this blog know that the devil is in the details in terms of the EWP.   Some banks include "weasel words" in the fine print, such as language  effectively giving the bank the right to grant or deny the early withdrawal, in their discretion.

Maybe this info is disclosed deep into the application process.  But why should prospective investors go through that paperwork to find out this essential information?
ChrisCD   |     |   Comment #25
Sauk Valley sends a set-up letter that denotes the penalty.  The bank signs the letter and returns it to Sauk Valley indicating their agreement of such.  Fairly straight forward.  :O)
Anonymous   |     |   Comment #26
Chris...let me echo the earlier comment which has not been answered, yet. Why not disclosure up front so that one can make an informed decision from the get-go? What is being offered is a security and while no offering circular, it is reasonable to have answers as early as possible w/o _____info from the requester
ChrisCD   |     |   Comment #27
First, it is not a security.  It does not have a CUSIP#.  It is not a negotiable CD that can be purchased through a broker such as Charles Schwab, Edward Jones, or Merrill Lynch.  It can not be re-sold on the secondary market.

Secondly, the underlying bank does not want a bunch of phone calls and is not taking retail deposits directly.  They will only take retail deposits through another bank's custodial program.  Sauk Valley Bank & Trust is the custodian bank we work with.  By doing it this way the underlying bank does not have to collect and deal with all of the personal information and CIP.

I don't need your personal info.  I don't need to know where you live.  All I need is an email address.  When the contact form is completed from the link above, we are notified that the inquiry came from this website.  That way we know we need to pay Ken if someone completes a CD. 


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