About Ken Tumin

Ken Tumin founded the Bank Deals Blog in 2005 and has been passionately covering the best deposit deals ever since. He is frequently referenced by The New York Times, The Wall Street Journal, and other publications as a top expert, but he is first and foremost a fellow deal seeker and member of the wonderful community of savers that frequents DepositAccounts.

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Important Details of CD Early Withdrawal Penalties

When you open a CD, it can be difficult to understand the details of the CD's early withdrawal penalties. Banks and credit unions often don't make it easy. The rate tables often only include the warning that early withdrawals may be subject to a penalty. One important thing to note is that the penalty is up to the bank or credit union. The size of the penalty and other details about the penalty can vary greatly for different banks. To understand these details, you'll need to review the CD disclosure. Here are some of the basic features and issues of the early withdrawal penalty to review in the disclosure.

Early Withdrawal Penalty Size

The obvious feature is the size of the penalty. This is typically specified in the number of days or months of interest. For maturities over one year, a penalty of 6 months of interest is common. So if you make an early withdrawal at exactly 6 months after you open the CD, you'll lose all 6 months of the interest. If you close the CD after one year, you'll lose half of the accrued interest.

The penalty size isn't always this simple. Here's what EverBank includes in its disclosure:

This penalty will be equal to one-fourth of the total interest that would have been earned on the principal balance of the account if funds had not been withdrawn prior to the maturity date.

For a 60-month CD, one-fourth of the total interest would be equal to 15 months. As you can see, this is much more severe than 6 months.

The complexity is often even worse. Here's what US Bank includes in its disclosure:

If your account has an original maturity greater than one year, the penalty will be the greater of either A or B, plus a $25 early withdrawal fee.
A. One-half of the interest that would have been earned on the funds withdrawn if held for the entire term.
B. 3% of the amount withdrawn.

In this case, the penalty will be at least as big as one-half of all the potential interest that can be earned. For a 60-month CD, that's 30 months of interest.

Some of the Principal Can Be Lost

What happens if you close a CD just a couple of months after you opened the CD? Can you lose some of your principal? Yes, it is possible that the penalty will eat into your principal. It depends on the bank or credit union. A few institutions won't eat into your principal. PenFed is one example. Here's what PenFed's disclosure describes:

Certificates with a term of 5 years or greater

If redeemed within 365 days of the issue date or any renewal date, all dividends will be forfeited.

If redeemed thereafter, but before the maturity date, dividends for the most recent 365 days will be forfeited.

So if you close the PenFed CD very early, you'll just lose all of the interest but none of the principal.

From my experience, PenFed is in the minority on this penalty feature. Most institutions don't provide any reduction of the penalty if closed very early. So if you close the CD 3 months after you opened the CD and the penalty is 6 months of interest, you'll not only lose all 3 months of accrued interest, but also you'll lose some of your principal equal to 3 months of interest.

Some institutions point out this feature in the disclosure. For example, Fort Knox Federal Credit Union has the following in its disclosure:

the owner shall forfeit an amount equal to 180 days dividends whether earned or not on certificates with maturities greater than 24 months.

So if you close the CD before you have earned 180 days of dividends (interest), you'll still lose 180 days of dividends.

Partial Withdrawals and Withdrawals of Interest

If you need some of the CD money, you sometimes have more options than just closing the entire CD. One option may be to just withdraw some of the accrued interest. Some banks like Nationwide specifically allow this in their disclosure:

You can only withdraw interest credited in the term before maturity of that term without penalty. You can withdraw interest any time during the term of crediting after it is credited to your account.

If the accrued interest isn't enough, you can then take out some of the principal. Many banks will allow a partial withdrawal of principal, and the penalty will only be based on the amount of the principal that was withdrawn.

Some banks don't allow partial withdrawals. One notable example is Ally Bank. Here's what Ally includes in its disclosure:

You may not make a partial withdrawal of funds you deposit in a CD prior to the maturity date. If you withdraw all of the funds you have deposited in a CD prior to the maturity date, we will close your CD, add the accrued interest to date to the balance and impose a penalty on your early withdrawal.

Bank Refuses an Early Withdrawal Request

It's bad enough that you will lose some interest, but it's possible that a bank can refuse the early withdrawal request. Some banks give themselves this right to refuse an early withdrawal in their disclosures. Here's what is specified in US Bank's disclosure:

Except as required by law, withdrawal prior to maturity will be permitted only with the consent of the bank which may only be given at the time of withdrawal.

Fort Knox Federal Credit Union also has a similar clause in their disclosure:

Withdrawal of the principal amount of your Certificate may be made only with the consent of the Credit Union

Not all banks and credit unions have this type of clause. Some clearly state in the disclosure that early withdrawals are allowed. Nationwide Bank's disclosure is one example:

You may make withdrawals of principal from your account before maturity. Principal withdrawn before maturity is included in the amount subject to early withdrawal penalty.

Early Withdrawal Penalty Changes

Another potential issue is if the bank decides to increase the early withdrawal penalty during the term of your CD. Such a change would be very unusual, but some banks include a clause in their disclosures that may give them a right to make such changes. For example, Capital One Bank has the following in its direct banking CD agreement:

We have the right to change this agreement, including fees and charges applicable to the CD, at any time. These changes may include the addition of new charges or terms. If we make changes, you will be notified as required by applicable law.

Most banks don't make it clear about their right to make changes to existing CDs, and as we've discussed in November, the risk of this happening is not clear.

One reader commented that BB&T changed its early withdrawal penalties on an existing CD. However, as one reader explained, this could be considered an immaterial change due to its very small impact.

Bottom Line

If inflation and interest rates do rise substantially, there will be much more attention paid to early withdrawal penalties of CDs. Once a CD is opened, there's not much that can be done. The time to review the early withdrawal penalty features is before the CD is opened.

Edit 3/29/2011: Changed Fort Knox FCU disclosure to a newer version.
Edit 4/08/2011: Changed PenFed's disclosure to a newer version.

Related Pages: CD rates

Related Posts


  |     |   Comment #2
I was the customer who posted about the change in BB&T's EWP.  The poster who responded stated that the change was immaterial since it was not a huge amount of money.  He did not want to believe that the EWP was changed at all, so rationalized that since the amount of money involved was so small it was somehow immaterial.  Baloney. 

For me, changing the rules in the middle of the CD term is the issue not the amount of the change in the EWP.  It is the idea that a bank and its customer entered into a contract.  The customer agreed to let the bank have use of his money for a specified amount of time and the bank agreed to pay a certain amount of interest during that time.  If the bank retains the right to change those terms any time they please and pretty much in any way they please, there is something ethically wrong with that picture.  The customer cannot stroll into the bank and make any changes in the contract any time they please. 

If it is stated in the contract that the bank has the right to make changes before the term is up, there is no way I am going to believe any verbal assurance that bank's CSR might make that they would not do that.  I got just such a verbal assurance and then in the middle of the CD term the bank changed the EWP anyway.  When I open CD's now, I either make sure there is no such clause in the contract or I open the CD with the full knowledge that the bank can change the rules at any time and will have no reticence about doing so.  To believe otherwise is just plain folly on the customer's part.
  |     |   Comment #3
It's a pity that depositors need to essentially be contract lawyers in order to make their way through the maze of boilerplate used by some of the banks and CUs.  In cases where the language is ambiguous, depositors might be able to avail themselves of favorable maxims of contract interpretation.  For example, these form contracts are non-negotiable "contracts of adhesion," where the bank and depositor have vastly unequal bargaining power.  In this setting, ambiguities are typically construed against the party drafting the contract.  

This presumption could be helpful if, for example, any given bank or CU tries to unilaterally alter premature withdrawal terms on an existing CD to be more onerous, relying solely on the authority of the bank's general "right to amend" clause. 

In addition, contracts must be construed in a way that makes sense of the entire document.  If a bank were to take the position that it could unilaterally alter to the depositor's detriment the premature withdrawal terms, what would stop the bank from also just flat-out reducing the interest rate to 0%?  Yet no court would likely copnclude that was a reasonable interpretation of the terms of the agreement.  Courts are understandably loath to construe contracts in a way that puts one party -- particularly the unrepresented "little guy" -- entirely at the mercy of the other contracting party.  The premature withdrawal terms are every much as material part of the bargain as the interest rate, and thus should be equally as protected from unilateral change by the bank.

A cautionary note is that if the bank or CU clearly says it can make changes, or discloses draconian premature withdrawal penalties, the depositor would likely be bound by those terms.  
  |     |   Comment #4
CD’s contracts are made to be self serving by the Banks or CUs.
By saying that they reserve rights to change the term of the contract, the customer is actually taken out of the one sided agreement and has no other recourse but to obey the bank’s rules.
  |     |   Comment #5
My attorney's opinion is to go for the best CD rate and not analyze the early withdrawal penalties, because the bank can rescind or change the policy in most cases.  I know that this blog does some very detailed analysis based on breaking the CDs scenarios, but in all due respect, I would go with my attorney's opinion, it makes a lot of sense.
  |     |   Comment #6
Dont forget, they're also tax deductable.
  |     |   Comment #7
Capitalone's penalty is to calculate how much you would gain by withdrawaing the cd early and investing in a higher rate cd.  This takes away your incentive.
  |     |   Comment #8
It is important that the interests of the CD holder and maker are in alignment.

This happens at CUs.  The bank's interest is aligned with its shareholders.
  |     |   Comment #9
When rates rise by a material amount, common sense tells us that CD holders will begin to cash out early in order to reinvest and take advantage of the higher rates. As the rates get higher and higher, the early withdrawal process will begin to steamroll. To slow down, or limit, the cash outflows, the banks will do whatever is necessary to protect their deposits, including increasing the withdrawal penalties, or even prohibiting an early withdrawal entirely.  It does not appear that there are any laws, regulations, rulings, etc that would absolutely prohibit a bank from changing the CD terms midstream and I have zero confidence in what a CSR may have to say in this regard. To take them to court, as some may suggest, would simply be to cost prohibitive and time consuming for most of us and, as a practical matter, there is nothing that we could do about any changes made to our existing CD's. Where oh where are our legislators when we need them. Bottom line, hope for the best but be prepared for the worst.
  |     |   Comment #10
Under the heading of "Partial Withdrawals and Withdrawal of Interest," you raise a very interesting issue: will a bank allow the depositor to make a partial withdrawal of principal without closing the CD entirely.  And you state that, in some cases, the answer is yes.  Coincidentally, a friend reported to me just last week that he had done exactly that at Rivermark Community Credit Union in Portland, Oregon.  He had only recently deposited a sum of money in a long-term CD there when he realized he'd left himself cash poor and went back to withdraw some of the money.  He told me--this from a man who is invariably precise about financial matters--that the penalty he paid was calculated only on the withdrawn amount.  I was astonished, because that seems to allow the use of higher-paying long-term CDs as virtual savings accounts.  Well, not exactly, but it certainly makes long-term CDs more flexible, and therefore more attractive.  A careful investor might consider this as a significant factor in comparing CDs at various institutions
  |     |   Comment #11
One thing is sure.  With a rise in the U.S. dollar monetary base from $800 billion in August 2008, to the current $2.7 trillion, we have seen the number of dollars in circulation rise about 3.5 times in a period of 2.5 years.  So far, the real inflation rate is running at about 8% per year, if you subtract government lies and gimmicks (see, www.shadowstats.com).  The best paying CD pays about 4% for a 10 year contract that is subject to the whims of the bank in one-sided agreements that are written to be intentionally confusing to customers.

Basic economics tells us that as soon as the velocity of money returns to normal, the increase of the monetary base will result in an equal increase in prices.  Thus, assuming there is no QE-3, 4, 5, 6 and on to infinity, prices are eventually going to more than triple within, perhaps, 5 years.  But, there WILL be more QE episodes, and the monetary base will be going up to infinity, along with the QEs, subject to a few depressionary pauses along the way.

Keep in mind that we are now living in an Orwellian society with an economy run by a very corrupt Federal Reserve that is controlled by a handful of casino-banks out of New York and London.  They are engaged in a massive program of theft against savers.  Savers are having their assets raided in order to give the value of their money to firms like Goldman Sachs, JP Morgan Chase, Merrill Lynch, Barclays, and so on.  Don't be stupid.  Investing in a long-term CD is sheer folly.  Investing in a shorter term CD accomplishes little to nothing because interest rates are so low. 

Stay in the best paying liquid money market accounts and, whenever there are big price dips (for example, during the next pause in the QE to infinity hit parade, buy gold, silver, and platinum).  Forget about long term bank investments.  If you buy long term CDs, you are going to be wiped out.
  |     |   Comment #12
There is some elbow room with Ally.  You can set the CD to keep funds in the account, and if you need the earned interest you can request to have the CD modified to pay out the accumulated interest on a monthly or quaterly basis, so you only have to wait 1 or a few months to get the interest.

The Oct 2010 Deposit Agreement has changes from the Jan 2010 agreement that restrict some flexibilities.  Section 5 now says "Annually ... we will automatically add the interest ... to the principal amount" so this can limit how much non-principal interest you can accumulate.  They also now require you to close a CD, with penalty, if you wish to retitle your CD into a trust account (e.g., Living Revocable Trust).  This would've bitten me, as I only had a trust account with Ally but when I opened additional CDs online they were titled in my individual name so I can to contact them to make adjustments.

  |     |   Comment #13
I was the poster who made the distinction between material and non-material changes in contract law. In the case of BB&T, I relied upon the poster who reported the change in the EWP to include a minimum charge of $25. Yes, I consider this to be immaterial and not the catastrophe the poster would have you believe. Although I am not questioning the veracity of this poster, I independently researched this and could not find any evidence that would corroborate what this poster said regarding a change in the EWP. Also, it may be that the BB&T disclosure explicitly allowed for changes in the terms of their CD's. I read the language very carefully before I purchase a CD, and if I find language which allows the bank to change the EWP or prohibits the early withdrawal of the funds, I will not under any circumstances purchase the CD. Although I do not want to insult the poster, he is overreacting and I believe needlessly scaring people. Other than this isolated and very dubious case, there is no evidence of any bank or credit union ever changing the EWP retroactively. So, before yelling fire in the theatre, please make sure there is a fire.

As another poster said, the real issue people should focus on is the probability of very high inflation in the future and the erosion of the value of our CD's. I worry about this much more than the bogus issue raised by the BB&T poster.
  |     |   Comment #14
I work in a law firm that has several community banks as clients, plus five regional bank holding cos. and two superregional.   Lou poster #13 is incorrect.  Here in Ohio, EWP language is not typically not binding on the institutions and the EWP's can be changed.  Case law supports this fact.  Whether or not these EWPs have been changed recently is immaterial.  Especially if there are additional consolidations, they have been found non-binding in most cases.  Even Ken seems to imply this.  I would recommend great caution before assuming that a long-term CD can be accessed based on EWP language or "policies" in force at time of acct. opening.
  |     |   Comment #15
Fort Knox credit union has raised their early withdrawal penalty on 5 year cds from 90 days to 180 days for old and new cds. Isn't that nice?
  |     |   Comment #16
Let's see Lou, you do not want to question my veracity but you use the words "dubious" and "bogus."  I do not appreciate being called a liar which is exactly what you are doing.  The terms of my existing CD's were changed before the end of the term.  If you choose to not believe that, have at it.  It happened. 

If simply stating what happened to me is "needlesly scaring people," then we are in more trouble than we can imagine.  By all means, let's all continue to avoid facing troubling things when they arise and keep those rose-tinted glasses on.

If the amount of the change in my case is "immaterial," how much money would you say would make it "material?"  $50, $100, $5000?  Where is the cutoff before it becomes "material? The issue with me is not the amount of money involved.  It is the fact that the rules were changed in the middle of the game.

What possible reason could a bank have to put in a clause that they retain the right to change the EWP if they never see any situation in which they would do so?  If the clause is there, whatever you might be told verbally about it is the only thing I see that is immaterial.

Bottom line, anytime you open a CD and that clause is there, just keep that possibility in the back of your mind just in case.  Go into it with your eyes open and at least you will not get an unwelcome surprise down the road.

  |     |   Comment #17
Poster #16 is totally right; see my prior post (#14).  I just walked in to one of our partners here and he agreed: in the current environment (maybe always), depositors should not rely on EWP's as stated by insititutions unless it is actually contractual and binding on their part.  Period.
  |     |   Comment #18
To #15,

Thanks for the heads up.  If you click on the disclosures link in this article, it states the penalty at Fort Knox is still 90 days for all of their CDs but if you go to the Fort Knox website itself and click on Site Map and then on the Membership Agreement, it states the penalty is 180 days for CDs greater than 24 months and still 90 days for those less than 24 months.  Since it does not state anything about CDs that are exactly 24 months, I wonder if we could win in court if we claimed there was no penalty for those CDs.  Hee Hee
  |     |   Comment #19
Gretchen, your posts are confusing me. You say that a partner in the law firm with which you work said you can't rely on EWP unless the language is contractual and binding. I am not sure what you are talking about, but the the CD's I puchase have no language explicitly allowing the bank to change the EWP. You say in Ohio the language is not binding, how so. Where is the language that allows you to change the terms of CD's. I need you to be more specific. By the way, why the heck are you buying CD's if you don't believe they are binding. In your view, they are no better than a liquid account. You are making a lot of claims and I don't think you really know what you are talking about. Can you give any examples of CD's where EWP's have been changed in Ohio retroactively. Just one!
  |     |   Comment #20
Regardiing BB&T, the more I think about the change in the EWP the poster is claiming, the more it is confusing me. This hardly makes sense, because nobody would pay less than $25 if they cashed their CD early. This is really no change, because it doesn't affect anybody. Regardless of how this poster feels, something doesn't make sense here, and I still wonder if we are getting correct information from him on this issue. Give me the date of the change and the exact language before and after, so i can independently verify.
  |     |   Comment #21
Fort Knox credit union just raised their EWP from 90 days to 180 days on all CDs that have already been opened.
  |     |   Comment #22
5 year CDs for sure I am not sure of the rest of the maturities.
  |     |   Comment #23
Was the change in the EWP for the Fort Knox CDs applied retroactively? Try to be specific.
  |     |   Comment #24

Most CD's allow the bank to change the terms of the EWPs; read the forms that the bank has or ask them if that is the case.  This is UNLESS the EWP "rules" are stated in the form of an agreement which they will abide by and is not subject to change or modification.  Big difference.  The latter is a CONTRACT, the former is an informal agreement that can be broken or modified by the bank.   CDs are binding; EWPs usually are not.  Read your agreement from the bank and inform yourself, or ask the bank.  I'm sure that they will tell you that.   I do not have time to give you examples of EWPs which were changed, but if I were you, I would not rely on them UNLESS THEY ARE CONTRACTUAL, especially with rates predicted to rise and depositors possibly looking to break CDs.  if you do not know the difference between an informal policy which can change and a CONTRACT, consuilt an attorney.
  |     |   Comment #25
I think Lou needs a legal dictionary and refresher courses in English and Business Economics.  Hard to believe they let him open bank accts.
  |     |   Comment #26
Gretchen, i will say it again - your post doesn't make any sense.
  |     |   Comment #27
All the CDs I buy have the EWP stated in the agreement. You say most CDs allow for the banks to change EWP. That is a pretty broad statement - Do you have anything to back that up. I am not surprised that you don't have the time to find any CDs in Ohio where the EWP has changed retroactively.
Fort Knox fan
  |     |   Comment #28
Fort Knox credit union did not raise their early withdrawal penalty on 5 year cds from 90 days to 180 days for old CDS open before Feb.7, 2011.  They are grandfathered in at 90 days EWP if opened before Feb 7 this year.  Call them and ask!
  |     |   Comment #29
To #28 and Lou:

I called Fort Knox twice and was told both times that all 5 year cds are now 180 day EWP no matter when you opened it even if it was opened 1 year ago or 3 years ago.  This is what I was told twice today from 2 different Fort Knox credit union employees. I would say that is retroactive.
  |     |   Comment #30
Fort Knox Fan:

Maybe you won't be a fan anymore I just called for a third time maybe you better call them.
  |     |   Comment #31
I just called Ft Knox and the change in EWP will not apply retroactively. I had the customer rep check this with a supervisor.
  |     |   Comment #32

I just called the main branch and talked to a supervisor myself and was just told 1 minute ago that it is retroactive all CDs are now 180 days whenever you opened it. I don't know who you are calling but I have 4 CDs there and I have no reason to make this up,I am angry because the only reason I opened them up was because of the 90 day EWP. Their main branch phone# is 1-800-285-5669
  |     |   Comment #33
I am a BB&T customer and the CD change mentioned is correct.  This affected new CD's as well as my existing ones.

The older penalties:

Early Withdrawal Penalties. Except as otherwise disclosed, for Certificates of Deposit
with a term of less than three (3) months, the penalty shall be an amount equal to all
interest that would have been earned during the term of the Certificate of Deposit. For
Certificates of Deposit with a term of three (3) months to twelve (12) months, the
penalty shall be an amount equal to three (3) months simple interest on the principal
amount withdrawn. For Certificates of Deposit with a term greater than twelve (12)
months, the penalty shall be an amount equal to six (6) months simple interest on the
principal amount withdrawn.

The new penalties:

EarlyWithdrawal Penalties.Except as otherwise disclosed:
Certificates ofDepositwith a termof less than three (3)months, the penalty shall be an amount equal to all interest thatwould have been earned during the termof theCertificate ofDeposit or $25,whichever is greater.
ForCertificates ofDepositwith a termof three (3)months to twelve (12)months, the penalty shall be an amount equal to three (3)months simple interest on the principal amountwithdrawn or $25,whichever is
ForCertificates ofDepositwith a termgreater than twelve (12)months, the penalty shall be an amount equal to six (6)months simple interest on the principal amountwithdrawn or $25,whichever is greater.

As for the $25 not affecting anybody, I would think it would affect small investors quite a bit if they had to close small CD's early. 


Paul Hortuag, Jr.
  |     |   Comment #34
My wife works for Fort Knox, has since '03.  The EWP change is for ALL CD's irregardless of when they were opened.  Sorry, Lou.
  |     |   Comment #35

Did you read #34? Don't forget to let me know if you are still a fort knox fan or maybe just a little less of a fan.
  |     |   Comment #36
Fort Knox fan-I called Fort Knox as well and was told the change was indeed retroactive, so it seems they are giving out conflicting information.

Peace-I have a friend who works at BB&T, so I gave her a call and their change was retroactive as well.
  |     |   Comment #37
Watch the 5 year treasury note it is at 2.25% and you don't have to pay state income taxes also you don't have to worry about being taken advantage of by the banks and credit unions. Who wants to worry about EWP's that can and are being raised and on top of that they can sometimes deny you the right to close your account early. The cd rates have to be much higher then treasury notes or they are not worth it.I opened a treasury direct account and the next time one of my cds mature I will put it in a treasury note as long as the rates make sense like they are beginning to,also that way the state that keeps raising my property taxes will have just a little less of my money.
  |     |   Comment #38
To #37-

Glad that you have a plan but hope that when rates increase you do not have to sell your 5 year T note before the due date...your loss just very well be many times more than any of the CD EWP's. Good luck.
  |     |   Comment #39
I called back and another CSR said it is retroactive. I downloaded the Membership Agreement and it said the following: "Your Agreement may be ammended or revised by us at any time, and any change in the Agreement shall be effective at the earliest time allowed by law." In addition it also says, "Withdrawal of the principal amount of your Certificate may be made only with consent of the Credit Union."

I would have never purchased a CD from this credit union with the above language. The fact that you need their permission to withdraw funds is already disqualifying, and I would certainly have asked about the meaning of the ammendment language to see if they are allowed to change the EWP retroactively. Given this language, it may be possible, but I am not sure. It may only pertain to prospective changes. The answer to this question should have been obtained prior to puchasing the CD.
  |     |   Comment #40
I suppose if you had certificate less than $2,500 it may have an impact. As to retroactivity, I would have to see the Certificate Agreement to see if it had language similar to Ft. Knox.
  |     |   Comment #41

Nothing personal, but if someone (like ME) works in a field (banking for law) and tells you something, maybe you take what they say as the truth rather than be insulting?????  I was just trying to educate you and the readers of this blog.  In our office, we LOVE Ken and this blog and read it DAILY.   What I posted as #14, #17 and #24 was the truth, as you've unfortunately found out.  Sorry for you, but maybe your experience will help others who read about it.  Good luck.
  |     |   Comment #42
Lou, why on earth would I continue to interact with someone who has three times called me a liar?  Not going to happen.  I provided all the information I had in my posts on this site several months ago when this topic was first raised.  You chose not to believe me and questioned my veracity.  Twice more in this thread you did the same thing.  All I can do is state what happened to me.  If you choose to continue to not believe it that is fine.  I am way too old to care.  I will ignore your posts from now on and please ignore mine.  Life is way too short.  Adios.

  |     |   Comment #43

You obviously relish the "rubbing it in" game even though YOU have proven NOTHING. Your opinion, as well as your boss, is not worth salt unless you have some supporting facts to offer, not your own para opinion, but facts.  Lou has been a far more informative poster to this forum than you ever will. BTW, if you ever 'find the time' you might point out a few of the Ohio examples that Lou requested of you. In the meantime, try to hold back on your sarcasm if you can.


  |     |   Comment #44
Lou, and others, we have been all over this issue in threads over the past six months or a year. It is good to see so many people now realizing this retroactivity is a reality. In fact, in those previous threads, I posted the definitive on Fort Knox -- having gone all the way up the ladder to the person who sets the policy, and yes, they retain the right to change the EWP, and most anything else. So, I am not surprised to hear they are now doing it.

In fact, in the threads over the past year, there have been at least three to four posters who said their institution had made such changes retroactively. I just wish I could find those posts again. But the one higher up in this thread is one of them.

Also, you have to look at more than the mere CD "contract" or agreement or whatever it is legally. Also applicable are the other disclosures and terms of service of the institution. Thee clause about changes toterms often is not in a location you woudlexpect, and it often is not a clear as a layman (or laywoman) might like, but its there.

In the discussion in the previous threads, I looked at several banks and credit unions, and they ALL had such a clause somewhere. I don't know if that meant that most institutions have such a clauses buried somewhere, but I certainly expect you will find that very many do, if not most or all of them. So, lou or anyone else, if you won't take a CD with such a clause, you might be nixed from most CDs out there. 

What I have been saying in the threads is to be aware of this and give a lot of consideration to whether you will need or really want to get your money out of a CD early before you take those longer terms. To take a longterm CD with the idea you will close it early and end up with more than you would have in a shorter term CD is real speculation, not unlike people speculating in the stock market. But most people in banks and credit unions are there because they don't want to speculate with that money.

Rest assured, when rates rise and all the people speculating decide it is time to pull their money out early as if it were a run on the banks, the banks and credit unions are not going to sit idly on the side and watch all their money disappear; they will do what they need to do, most especially if their solvency is at stake but even just to keep profits up.
  |     |   Comment #45
Hey me1004, I agree - you have to read the CD agreement. If the CD doesn't have a separate agreement with its own beak down of the terms and conditions, then you need to refer to the truth in savings disclosure and other agreements. On Oct 15, 2007 I posted anonymously on this site (before you were able to post under a name) the dangers of purchasing a Mutual Bank CD where there was language prohibiting early withdrawal. I asked Ken to warn his readers, but he did not mention it then. No one at that time was talking about this and no one seemed to care. Here is the post:


"Anonymous - #1, Monday, October 15, 2007 - 4:39 PM

You forgot to add that they are one of the few banks that can prohibit an early withdrawel at their discretion. Most banks must allow it if you pay the penalty. For this reason alone, I passed on their CD. You should mention this in your blog. I could see that if they were having financial problems, they might disallow an early withdrawal. I think bankrate.com downgraded them to 2 stars."

You will note that I also took notice of their financial difficulties. In fact, they were taken over by the FDIC on July 31, 2009, close to 2 years after my warning. I am telling you this, because I know what I am talking about. I own CDs from 14 different banks and credit unions and none of them have the language with which you referred.
  |     |   Comment #46
Sorry, I meant to say "to" which you referred in the above post
  |     |   Comment #47
Poster Hank - #4, above is right,

Which part of the bank reserves right to change the rules at any time, is not clear to you all.

You (customer) is excluded of any complaint by reading and agreeing to it.
  |     |   Comment #48
Ken, The NCUA has a brand-new Office of Consumer Protection. Suggest you ask them to look into Fort Knox's behavior.  http://preview.ncua.gov/Resources/Pages/LCU2011-17.aspx
  |     |   Comment #49
It appears to me that there may be a law requiring banks to inform consumers of retroactive changes in CD penalties, allowing the consumer to close the CD prior to the new penaltis taking effect. I have no direct information regarding this, only infer it from the way some of the disclosures are written. Also that seems to be how the CU that recetly raised penalties handled this issue. Does anyone know of a reliable way to determine whether this type of law exists? If it does, then one can purchase a CD with the knowlege that the CD can be cashed in prior to a penalty rate change.
  |     |   Comment #50
I have just contacted the following site to express my concern about cd penalty rates rising retroactively as interest rates rise: help.consumerfinance.gov/app/tellyourstory.

It might be useful for others to express their concerns regarding this issues.
  |     |   Comment #51
  |     |   Comment #53
#51, like Ken said, there is no way you can be charged with a penalty for a CD you do not own. Demand to talk with a supervisor, because the C/R you're are talking to is most definitely incompetent.
  |     |   Comment #52
@anonymous #51, the early withdrawal penalty should not be based on the interest rate of your old CD. According to Wells Fargo's disclosure:

The early withdrawal fee is based on the principal amount withdrawn, at the interest rate on your CD at the time of withdrawal.
  |     |   Comment #54
  |     |   Comment #55
Assume that a bank requires a minimum opening deposit of $10,000 for a particular CD in which you're interested in investing $250,000.  Assume there are EWPs.  Assume the CD's terms strictly prohibit "partial" early withdrawals.  I suggest you open 25 CDs, $10,000 each (purchases spread-out over successive business days, if the bank so requires).  I employ this strategy to minimize the damage caused by provisions written into CDs prohibiting "partial" withdrawals.  If more & more depositors would do this, then perhaps banks, frustrated with increasing volumes of  paperwork, would eliminate the "partial" WD prohibitions. 

Cynics might say, though, that the banks would simply conjure up some other adhesion tactic in response.  These outfits need to be strictly regulated; their continual tricks going all the way back to the 1920's should have taught us that.  What we learn from history is that we don't learn from history.  
  |     |   Comment #56
Our Father passed away a few months ago. He saved money to prepare for any medical needs in his older years. He unexpected passed away and did not need to use the money. He had CDs with various amounts in six different banks all in the name of our Family Trust. After we supplied the appropriate Trust documentation, Death Certificate, and our IDs, three of the banks surprised us and cashed his un-matured CDs for us the very same day. Two of the bank branches required corporate approval which took about a week, which was still a very reasonable amount of time.

PNC Bank on the other hand would not cash our deceased Father's 13-month CD without a 6 month penalty. It matures in October 2017. Their account agreement states in the Early Withdrawal Penalties section: "...will be subject to financial penalty (except in the case of death or legal incapacity of any owner of the CD)". The associate, the branch manager and supposedly her boss's reply was: "Our Dad was the Trustee of the Trust. He passed away, the Trust did not because it is a living document."

Have you heard of others dealing with this interpretation? If a Trust cannot quality in the case of death, then it can't apply to the rule, so the rule should be applying to the Trustee, a human being that can pass away.

Thanks for any feedback / opinion on this situation.
  |     |   Comment #57
The trust did not die. To their credit, the other institutions were simply acting on your behalf in cashing the CD's. Wait out the 13 months on the PNC CD and forget about this bump in the road. Trusts can be tricky...as you now know.
  |     |   Comment #58
Anony is correct. Be happy the other banks accommodated you in your rush to get your hands on your deceased father's money. PNC Bank acted strictly in accordance of the law and the trust. It's has nothing to do with their interpretation.
  |     |   Comment #59
The bottom line is "DEPOSITOR BEWARE". Some banks such as BBVA COMPASS charge $25 plus 1% or 3% of the amount withdrawn from a CD depending on the terms (under 12 months or over 12 months). If you need to withdraw (for example) all a $100,000 CD before the maturity date the penalty for taking YOUR money out is to charge you a hefty $3,025.00 regardless of whether any interest has been paid. Where is consumer protection? You now have only $96,975..This brazen institution even states this penalty practice right on their website. DO NOT PUT YOUR MONEY IN SUCH A BANK. Read the fine print on penalties and beware that they can change them during the term. DON"T make the same mistake I did. Do not fall for the higher rate offer.
Look for REAL banks that limit penalties to a portion of , or all of , the interest earned on the CD and doesn't take from your principle deposit.

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