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Make Sure You Don't Get Ripped Off When Your CD Matures

A reader was kind enough to email me his experience with a CD that recently matured. It's a good lesson for all those who have CDs.

Bankers Revenge !

Attention all CD depositors - please read my story and avoid my huge mistake !! Well, like many of you, my CD expired and was up for renewal. I really couldn't find a better place to put my money so I thought I would leave the CD with Bank Atlantic. Because I did nothing, the CD rolled over to a new CD automatically for another 12 month certificate. Well, my old CD rate was 4.17%, and today (7/17/09) I went to the bank knowing my rate would be low - but they advised my new rate was .80% ! I was floored, .80% - that's less than 1% I said - how could that be? The CSR advised, that was the new rate for rollover CD's. Strangely, their website is showing a 2% CD rate for 12 months - how did I get a .80% rate?? The CSR advised that unless you negotiate a rate - you automatically get the lower rate. I then advised that I would cancel my CD rollover - the CSR said sure no problem, you owe us a $275 penalty !! The CD had just rolled over to a new one and I was 1 day out of the grace period !! So not only did they rip me off on the CD rate - they also charged me $275 to get out of the bad deal. Other depositors need to be aware that if you let your CD automatically rollover - you could end up with a very poor rate. On Friday, 7/17/09, I moved my money to Progress Bank - they had a promo rate of 2.80% for 12 months. Banks are getting really stingy in this economy !!

I've read reports from readers of other banks doing this same thing. Wachovia is one. With interest rates at historic lows, it's especially important these days that we don't let banks take advantage of us.

Last year I wrote a post Things Your Bank Won't Tell You that lists several issues related to CDs and savings accounts that banks don't clearly disclose. If you're unaware of these, it can be costly.

For those who would like to get in on that 2.80% 12-month CD, I'm afraid it's over. According to the reader it was a grand opening special at Progressive Bank's new Tampa branch that ended on Friday. However, Progressive Bank continues to offer a very competitive reward checking account with a 5.05% APY (as of 7/18/09) on balances up to $25K if the typical reward checking requirements are met each month (see post).

Thanks to the reader who shared his experience on this rollover CD. If you have similar experiences that you think could help others, please leave a comment or email me.

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  |     |   Comment #1
While financial institutions in this country are occupied with driving-down deposit rates, raising fees, and pulling shenanigans on depositors, in the UK the case is the complete opposite, with banks competing for deposits by raising rates as high as 5.4%...

  |     |   Comment #2
Warning: Don't be stupid.

Why on earth would anyone who is rate-conscious allow a CD to roll-over without checking what the actual rate will be?
  |     |   Comment #3

>> With interest rates at historic
>> lows, it's especially important
>> these days that we don't let
>> banks take advantage of us.

Another way to look at this, from bank's perspective is:

We - the banks - have disclosed our policies to you - the depositors - when you opened the CDs. You have read and agreed to our policy at the time of opening CD that has three main components a) nice CD rate b) reasonable grace period upon maturity c) default action the bank will take if the depositor does take a different course of action.

When we carry out the default action if you do not take a different course of action during grace period, then we are simply enforcing the terms that you and we agreed at the time of CD opening. That's no taking advantage. That's merely fulfilling terms.

  |     |   Comment #4
It's good to know! I do check CD rate online when it matures, but I didn't know they will roll you over to a much lower rate than the same term that's posted online.

I also thought when you back out of a CD, you loose the interest, in the case posted, 8 days (7 days grace period + 1 day) of interest. Didn't know they actually charge a fine on it.

fortunately I have never let a CD automatically rolled over yet, always able to find a better rate or just put in savings if the rate is as low as savings!
  |     |   Comment #5

Well the lessons, if any, for you - the depositors - are:

1) you better read/understand the terms before depositing

2) if you wish to withdraw upon maturity make sure that you act within the grace period

3) these days calendar/reminder services are offered on the internet for free which you may want to consider for reminding you of the CD maturity or else there is that old fashioned paper-calendar way!

  |     |   Comment #31
My wife and I are retired and leaving on only social security
We lost our home in the 2008 recession
I also lost my business
We moved into a rental home. During the move I found 2 certificates of deposits with a face value of $2000.00 each with a due date of 1986

I called FDIC and the original certificate was drawn on the Bank of Mount Prospect in Illinois
They said if transferred a couple of times and now it is at Chase Bank
When we went there initially they said they had no record. Then about 8 months ago I recieved a call from a Curtis from a naperville branch and he found the original signature card and a copy of the CDs

They told me it was too old to collect on
Now I need someone’s help
  |     |   Comment #32
What does "too old to collect on" mean? Your account was probably considered dormant and your CDs abandoned. Did Chase then transfer money to state's unclaimed property repository? If yes, check here, https://icash.illinoistreasurer.gov. If not, ask what happened to the money.
  |     |   Comment #33
Sylvia, that would be the correct and legal procedure.

"it was too old to collect on" is definitely not the right reply from the bank!
  |     |   Comment #6
I note, this was a DIRTY trick the bank played on him. And potentially even illegal -- not sure about that, would need details to determine. And if I were him, I would read his terms in every little detail.

ALL banks I have been with state that the CD will roll over at the rate in effect at that time for that term. His did NOT roll over at that. The rate in effect at that time for his term was -- what did he say, 2%. But they had some special, secret rate of .80% for him! That better have been stated and stated absolutely clearly - or they would be legally liable for not giving him the full 2% in effect fo thtat term at that time.

I have NEVER before heard of a bank having some secret rate at which it rolls over.

Mind you, he never said he did not check the rate in effect at that time. If he had, he would have expected about 2% -- which unfortunately is actually reasonable in this climate.

I note, I HAVE had banks try ILLEGAL dirty tricks on me but stopped them in their track and put terror in their hearts. For instance, Amtrust tried to delay giving me back my CD money at the end of the term, claiming they had up to a week to issue a check and without giving me any interest during that time. I read the details in the disclosure, and there was NOTHING in their giving them one second beyond the due date. I have had other such illegalities from other banks, such as eLoan. And I think this guy's case, wit this secret rate, will turn out to be another illegality, an actual criminal offense.

Why are banking regulators letting this happen?!
  |     |   Comment #7
Years ago I went into my bank. The teller told me that I had a CD that was soon to rollover and that I wouldn't get the best rate. At the time I didn't know this was standard banking practice. I had many CDs and having to go into the bank and manually renew them was such a pain that I eventually found other ways to earn a higher interest.

On a rollover a bank should give you the best rate available to an existing customer. Anything other than this generates distrust, which is the last thing a bank needs. Fortunately the bank had a teller that was looking out for a customer.
  |     |   Comment #8

>> I note, I HAVE had banks try
>> ILLEGAL dirty tricks on me but
>> stopped them in their track and
>> put terror in their hearts.

... Err ... is that a an exaggeration?

How exactly did you manage terrorizing a financial institute?

Perhaps you spoke to a couple of employees at the financial institute forcefully, perhaps even rather rudely. Besides that what did you do?

  |     |   Comment #9
i called up Wamu(now Chase) and it turns out they would have done the same thing to me...

thanks for alerting me
  |     |   Comment #10
Its common sense folks, your bank could care less about you and your money!
  |     |   Comment #11
"...Amtrust tried to delay giving me back my CD money at the end of the term, claiming they had up to a week to issue a check and without giving me any interest during that time": Principal Bank did also try this line, except that they redeem maturing CDs by ACH. I had to insist that it would never fly... The funds from the maturing CD were credited to the destination account on the day following maturity.
  |     |   Comment #12
"I also thought when you back out of a CD, you loose [sic] the interest, in the case posted, 8 days (7 days grace period + 1 day) of interest. Didn't know they actually charge a fine on it."

It's not a fine. It's the early withdrawal penalty that is spelled out in the disclosure that you should read before you buy the CD.

Always know how to get your money out before you put it in.
  |     |   Comment #13
Chase does something along the same lines. You do a CD special for 9 or 12 months, and at expiration, they have new specials at 7 or 13 months. So your CD will rollover at a crappier rate since it is not a current special. Not illegal, but they know that a % of people will let it rollover over at that crappy rate.
  |     |   Comment #14
I thought everyone knew this. I had this happen to me a few years ago, even before rates got so low. Miss the grace period by one day, and the bank will give you the lowest rate possible for a CD, at the exact same term you had before.

This is how the banks are able to post such wonderful profit numbers despite the fact that the economy is in terrible shape. They use every device possible to keep your money and pay you the lowest interest they can get away with. The banks are not our friends, even though we may have nice relationships with their "front people," tellers and the like. They are constantly changing their rules and policies, and then telling customers that they were supposed to be aware of them, apparently by reading the micro-fine print in those little pamphlets they send out.

A branch manager at a local bank told me about a year ago that this bank's (and presumably other banks') ultimate goal was to get rid of CDs, and only pay interest on checking accounts based on usage. Given how much money the government has given them in bailouts, I am afraid that they won't have to pay anybody interest on savings, and will just offer to keep your money safe for free.
  |     |   Comment #15
My experience recently with a obtaining the funds from a CD maturing at Navy Federal Credit Union still baffles me. I received a check (Navy FCU did not initially give me the grace period interest but am told this is being corrected) and deposited the check at Apple Bank with "for deposit" and my joint account number on the back (check made out to same joint account owners' names). A few days later I noticed online that a fee was charged to my account and the entire of amount of the check was withdrawn from my account. Finding no one on the phone to help I went straight to an Apple branch near my home and was told that Navy FCU refused the check for "lack of endorsement" All my conversations with Navy FCU on the phone supervisors indicated that they would not have refused the deposit. I was told by Navy FCU that they guessed that Apple Bank had done an electronic deposit and that with "cashier's checks" that is not permitted. Apple Bank a few days later tells me that is the way they process all checks and that I can bring in the substitute check with my spouse and my signatures on it and they will then honor it. When the electronic substitute check came in the mail it is stamped all over it --- "Cancelled for lack of endorsement". I then spoke with Navy FCU on the phone and they said I could go into a Navy FCU branch and easily have the check replaced.

After receiving the "substitute check" in the mail I then went to a Navy FCU branch and requested a replacement. Initially I was treated like some sort of criminal since the representative serving me said "oh this will take a long time. We have things to do and you'll have to wait outside some place." I was quite indignant and most bothered by the treatment. I indicated I wasn't going any place --- that I had been denied the use of my funds and they could bring whomever they wished to see me but I wasn't going any place. After awhile a representative who did know me came in --- said hi and how are you doing (I had dealt with her many times in the past) and then the first representative made an effort to resolve the matter.

After signing assorted paperwork Navy FCU redeposited the funds in my joint share account and I decided to let the dust settle for a few days and probably next week I will have them FedEx a new check to me overnight. In the meantime I have lost whatever interest I would have earned (I have a liquid account with Apple currently guaranteed to earn 3.75% APY until sometime in December) but do not want to risk having another situation develop like this one.) This CD was for a substantial amount of money and to have the funds accepted and then withdrawn makes me extremely suspicious of the motivations of both institutions. After all they both denied me my money. Apple Bank charged me a fee for denying me my funds and has not said they will reverse it, and of course, all the interest I have lost with this whole mess no one is replacing. Each side says they are right. How am I to know who is right? Who can answer that question?

If anyone knows the proper regulatory agency to file a complaint with about this incident I would appreciate any comments pointing me in the right direction.
  |     |   Comment #16
"hi... just dropping by!"
By indavao, at 11:54 AM, July 18, 2009

  |     |   Comment #17

>> Make Sure You Don't Get
>> Ripped Off When Your CD Matures

Well ... calling the implication of the one of terms of CD that is standard/established/well-known and most importantly fully-disclosed to and agreed-upon by the depositor, a rip-off ain't right.

Isn't it more like negligent/forgetful/stupid/incapable/non-alert customers/depositors mostly end-up paying-more/getting-less?

  |     |   Comment #18
Just like credit cards, the practice needs to make it stand out and clear for the customer, not in fine print.

Like the other person said, if they have the same term with 2%, they shouldn't roll his CD into a 0.89%. Unless the CD term says it will be roll into CD account that's lower than whatever posted online rate (I never see any of my CD has that on it).

If it's legal for bank to do that, I do think it's a trick played by the banks, just like those credit card companies, and it is considered as a rip-off, like what the congress said about credit cards.
  |     |   Comment #19

>> Like the other person said, if
>> they have the same term with 2%,
>> they shouldn't roll his CD into a
>> 0.89%.


You as a depositor perhaps are after earning maximum possible interest you can. Bank as a 'for-profit' entity is definitely after making maximum profit possible.

Bank management that works on behalf of the shareholders has fiduciary obligation to look after the interest of the shareholders and to return them maximum possible profit.

It would be naive for any bank depositor to expect the bank management to put depositors interests ahead of shareholders.

  |     |   Comment #20
Example of a lazy consumer who trusts Banks.
  |     |   Comment #21
I just got an email from WaMu/Chase stating my 12 month CD is maturing this month. This is what is stated at the end of the email:

Please contact us by seven days after your maturity date. If the last day of the grace period is a non-business day, the grace period expires on the prior business day. We may request notarized written confirmation to close and send check by mail.

Do they really require this?
  |     |   Comment #22
Hello folks:
The rate is always made clear. Your maturity notice will either have the new rate or tell you that it will be decided later, and you need to find out what it is.

This is another example of what happens when you ****-U-ME.

Don't complain that you didn't know when then didn't tell and you didn't ask. Don't complain about fees which are clearly explained and industry practice.

However, thank you for making rates better for those of us who pay attention. We appreciate it!
  |     |   Comment #23
The two banks where I worked as a teller sent out notices to their CD owned clienteles (sp?) that their CDs would be mature very soon. My boyfriend and I had a CD at our credit union, and we, too, received a notice saying that it was about to mature. We had a choice to come in and roll it over or cash it out.
  |     |   Comment #24
I keep all of my accouts on an excel spreadsheet.And check them
at least once a week.

For CD`S I also list the maturity
date. And you can bet the day of
maturity I am on the phone with
the bank to check the rollover rate.

Yes, its a bit of work but well worth it.

I would also like to thank bank deals for this site. For me its a
valuable tool.
  |     |   Comment #25

>> I keep all of my accouts on an
>> excel spreadsheet.And check them
>> at least once a week.

As do I. But I do it a bit more frequently.

>> For CD`S I also list the
>> maturity date. And you can bet
>> the day of maturity I am on the
>> phone with the bank to check
>> the rollover rate.

What I do is before/immediately-after I open the CD I inquire what is the procedure to withdraw at the maturity. I've seen a few variations.

1) Some banks permit a phone call request.
2) Some permit an email message thru their secure email system for withdrawal.
3) Some permit a fax request.
4) Some need a USPS mail request.

In any case I make a note regarding this (with fax number or with Postal Address as applicable) in Excel. Then I set Yahoo Calendar 'event' with reminders for dates about 2/3 days to 2/3 weeks in advance depending upon what sort of procedure will be needed.

>> Yes, its a bit of work but well
>> worth it.

... Indeed ...

I've never missed withdrawal within the grace period ... ever.

Being organized is the key here. The Banks and we - depositors - are after the same thing - profit. Banks are well organized by design. Depositors need to design their own system to work in tandem with their own needs and at the same time work well with the banks so as to maximize profits!

  |     |   Comment #26
Quite often banks will have special rates for 'new money' so I don't find this too surprising. There is no law stating that roll over rates have to be the same as the rates on their website (most likely for new $). You would think they'd want to keep their current customers and offer them the same rates but like in this case, they entice you to make the initial deposit with an attractive rate and hope that you'll get lazy and let it roll over at the lower rollover rate.
  |     |   Comment #27
On the BankAtlantic website (rate on the page listing the CD rates) there are some things to consider,

"Need a new bank? Start with a great rate! 2.00% APY"

Then in fine print on that same page it also says:

1. Offer is subject to change. New money only. New money is defined as funds currently not on deposit at BankAtlantic.

So there you have it. Misleading perhaps but you gotta read the fine print.
  |     |   Comment #28
I was robed of my entire $13,336.20 2 yr CD.  JZ Buffalo, NY
  |     |   Comment #29
Any facts? 
  |     |   Comment #30
Never in all my years of purchasing CDs was the entire amount not available  upon maturity.  I really think you should share how something this unusual could have happened to you. Did it involved the FDIC insurance and maybe you had more in a failing bank than you were allowed??  Thanks.

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