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Very High CD Rates Advertised in Newspapers - Are They Real?


Have you noticed ads in the newspapers which advertise very high short-term CD rates supposedly from FDIC-insured banks? These are quite common. Last year the FDIC mentioned these offers in its consumer news. Here's an excerpt:

Beware of an Advertised CD Rate Far Above the Competition – First, it could be a product issued by a company that is not federally insured and second, it could be a marketing ploy. In either case any money invested could be at risk. A company may advertise in the local newspaper a 5.0 percent interest rate for a six-month bank CD for consumers to invest. When a customer calls, he or she is told to come to the office to discuss the details. It turns out that the bank is paying only 5 percent on the first $1,000 - not 5.0 percent on any balance. Another situation to beware of occurs when the customer is informed that the bank will pay only 2.5 percent but the sales person for the company offers to add enough money to the CD purchase to make up the interest rate difference. When the CD matures, there is no similar offer on a new CD and the individual can be steered into purchasing a non-insured investment that may be a poor choice for the consumer but very lucrative for the sellers.

If the company does place the deposits with an FDIC-insured bank and it does add in a bonus to make up for the interest rate difference, it could be a good deal if you don't mind listening to their sales pitch. It would be similar to receiving a bonus after listening to a timeshare sales pitch. But remember they wouldn't be making these offers if they weren't able to convince a significant number of people to buy their non-bank products.

With this in mind, here are some examples of these CD ads that I've seen in today's papers.

From the 8/22/10 edition of the Austin American Statesman:

  • 4.50% APY 6-month CD via Sun Cities Financial Group (512) 502-1715. Important small print: Yield may include a bonus. $25,000 deposit required. Sun Cities is not a bank.
  • 5.60% APY 3-month CD & 4.30% 6-month CD via First Fidelity Tax and Insurance (512) 402-8514. Important small print: Yield may include bonus. We are not a bank. Minimums and maximums apply.

From the 8/22/10 edition of The Oklahoman newspaper:

  • 5.01% APY 3-month CD via Firstar Financial Group of Central Oklahoma, LLC. Important small print: Firstar is a financial services firm that locates banks offering the highest CD yields nationwide; rate and deposit subject to availability; rate will be provided by the local Firstar office as a Promotional Incentive.

The important question to ask is what's the maximum deposit that will qualify for the advertised yield. If the maximum deposit is small and it's only a 3-month term, the bonus they will add will likely be small. For example, the total amount of money earned from a 5.60% APY 3-month CD with a $10K deposit is only $140. If the bank they are using is paying 1.00% for the 3-month CD (which is competitive these days), the money earned on a $10K deposit is $25. So the money you would receive would come from the following:

  • $115 bonus provided by the financial company
  • $25 interest from the bank's 1.00% 3-month CD

If the maximum deposit for the 4.50% APY 6-month CD is $25,000, that could add up to a nice bonus:

  • $406 bonus provided by the financial company
  • $156 interest from the bank's 1.25% 6-month CD

Note, these bonus amounts and CD yields are just guesses about what may be offered. They're just intended to show how the companies are able to offer the high yields they are advertising. Do you have experience with these types of companies? Are there similar offers in your local paper? Please leave a comment and share your experience.

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Previous Comments

  |     |   Comment #2
Last Thursday night we went to a lake front resort for a presentation. They pushed a 7% guaranteed product for up to 18 yrs. Their firm had lawyers, CPA's, financial planners etc. The first two visits with them are free. They want to manage your whole portfolio. Make your wills, trusts etc and have copies of what you have now if you have them. Made several mistakes in the presentation I think. (1) The lawyer said he has never been so busy since joining Gary's firm. Said Gary had great "MARKETING SKILLS." (2) Said you have a 5 year look back period once you enter a nursing home. YOU HAVE A 5 YEAR LOOK BACK PERIOD ONCE YOU APPLY FOR MEDICAID. (3). Said that Medicare will go up to around $105 next near. It will not go up for those who did not get a cost of living raise on their Social Security checks. (4) They had sitters around the room listening to the remarks made at the tables during the presentation.

 Also in the very very small print at the bottom of the screen it said this is not meant to be legal advice. Pretty funny. It was worth sitting there for 1 hour for the wonderful prime rib dinner, salad, rolls, fresh vegtables, and chocolate mousse at a beautiful lake front resort and visiting with others at the round table. Met some very interesting people.
  |     |   Comment #3
These folks (or a variant thereof) advertise in the SF Chronicle all the time. They're obviously an annuity-selling outfit.

I suppose you can view the "teaser" rate they offer on their 6-month CD as about what you would get by going (with your spouse) to one of the "free dinners" they use to tout their annuities.

So, would you rather have the cash or a prime-rib dinner for two?

I'd rather just show up at the appointed restaurant and get the dinner.

PS: In the trade, folks like us are called "plate-lickers", people who just show up for the free dinner and have no intention of buying the annuities. Indeed, we usually are somewhat disruptive, arriving after having a couple of drinks and snickering at the presentation, to the amusement of all at our table. Generally, we are shown the door (86'd as it were) before dessert.

  |     |   Comment #7
Not sure if anyone will see this, but to update my comment #1, I note that Sun Cities Financial advertised in today's Phoenix newspaper, a 4.25% 12-month FDIC-Insured CD (yield includes a bonus) on $10K.  Was very surprised to see that "4", as their ads lately have been around 3%.
Kathy Hastings
  |     |   Comment #8
Dallas Morning News/First Fidelity Insurance/David Boss at 740 E. Campbell Rd, Suite 900, Dallas, Texas. The ad says "5.6% for 3 month FDIC insured CD and 4.55% for 6 months. Yes, I was told that I had to come to the "office suites" to hear the spill and fill out the paper work. I wanted to invest $355,000's if this is actually an FDIC insured CD as it's advertised to be. My first question while I was sitting down was "when does the $250,000 limit per depositor end"? Mr. Boss was furious with me for asking that question. He immediately said that "he and I were not a fit because of my asking that question". WEird? sure it was. I left. He continued to be rude to me as I left the room. I came home and found this web site after the "weird Mr. David Boss 5 minute minute". I now fell lucky that I didn't sit there to listen to a bunch of salesmanship trickery or to call it what it actually is: FRAUD
  |     |   Comment #35
Its because the FDIC only insures up to 250k Per cd. which is why most Brokers will only invest 249k this way the yield that you get back is totally insured. So if you were to invest 355k on 250k of it would be FDIC insured the rest would be a huge risk especially through a service like this.
  |     |   Comment #9
Ad in yesterday's Houston Chronicle, 4.00%, FDIC Insured 6 Month CD, in fine print, min. $25,000 deposit.

Advertised yield consists of 1.10% yield plus 2.90%bonus which equals advertised yield. New custmers only.

Wouldn't touch it.
  |     |   Comment #29
I don't know why this person said he/she wouldn't touch it? I did and I got 4.00% on a 6 month CD with a bank in California.
  |     |   Comment #10
just called , waiting to be called back and found this link after googling suncities,  now will not waste my time with a seeminly  "if its too good to be true", it probably isnt.  thanks.
Not so naive
  |     |   Comment #11
I agree with 2sagesAnanonymous! Sun Cities in Houston would not discuss details with me (4.05% for 6 months) Had to come to their office. Been there, done that before!
Helen Collins
  |     |   Comment #13
My daughter and I have actually done business with Sun Cities Financial Group recently and we are both very satisfied!!  When I saw the ad in the Houston Chronicle I called in and spoke with a very pleasant lady.  She set up my appointment that same day and I went in with my matured CD that week.  I did indeed receive the advertised rate in the paper.  This young lady was very good at explaining the account and confirming that it was FDIC insured.  I only deal with FDIC insured banks.  She even told me that once my CD matured she would welcome me back in 6 months to open another CD.  In these next 6 months I will be making more interest than what I was offered by my local bank and credit union for a 1 year CD.  Can't beat that with a stick!  Frankly, I don't understand the negative comments if you haven't visited with them.   
  |     |   Comment #14
 Several months ago Sun cities ran an adv. on CD's that were in the 3% range, I called for more information and also checked the BBB because i was curious on how they did this. Everything was explained to me in detail.  I have bought several CD'S  from this company and I found the representitive to be very knowledgable. Everything they told me has happened with no surprises
  |     |   Comment #15
Is it right that a company like Sun Cities has to pay extra interest (beyond the usual 0.85 %) to a bank in order to get a FDIC insured CD (for me) from the bank . Would they have to take my money to the bank, plus the extra money from their own to the bank to buy that CD, or  can they keep my money for their use? ( and then how can they buy a FDIC CD for me ? ). I am confused . Somebody can succeed with a " sure-lost " business.
Mary Pinter
  |     |   Comment #17
When I first saw the Sun Cities ad in our local paper I was floored at the higher interest rate seeing I have be shopping and could not find such a rate online or locally.  Of course I did my research and called the BBB.  The BBB did confirm they were A rated and that there were no recent complaints on file.  I have seen some unfavorable comments about Sun Cities but none of them where from a credible source (mostly anonymous).  I was assured with the BBB accreditation and made my appointment.  I did indeed open my CD and write my check directly to the bank they offered me that day.  I signed bank forms and walked out that day with copies of it all!!  I will be back to Sun Cities when my IRA matures later this year. 


  |     |   Comment #18
The last few comments made in early March sound way too much like a sales pitch, and the writing styles are suspiciously similar.  I have to wonder if an employee from Sun Cities anonymously wrote the favorable responses.
A Sun Cities Customer
  |     |   Comment #19
You are so correct and that is the problem with anonymous comments because you never know whether or not the negative comments are made from a banker or stock broker who lost an account because of the better rates through Sun Cities Financial Group. That is why I looked into the Better Business Bureau and they have been in business since 1998 and surely by now they would have come to know of a problem.  NO such valid complaints after 13 years of being in business.   
  |     |   Comment #20
Just got back from my meeting with Jessica. I was told the "deal" had changed since I had set up my appointment (which I was assured of when I set it up) They also would not set up the account to a trust, because it is not a person with a beneficiary. Which is total nonsense.The reason they are offering the high rates, is first to see who has $25k to drop in an account, and then they are going to sell your information to whom ever will pay for it.

Do not deal with these people. 
Sun City AZ Customer
  |     |   Comment #21
That's funny just yesterday I saw an ad from Sun Cities advertised at 3.25% for a 6 Month CD and I met with Jessica this morning and I got a 6 month CD at 3.25%. I did not have any problems and I felt Jessica was more than helpful.   
  |     |   Comment #22
Since CD rates are so low, wouldn't it be great if the government decided to allowed IRA/401K withdraws to be tax free for those 65 ?
  |     |   Comment #26
They do, it is called a Roth IRA.
  |     |   Comment #27
Roth IRA are taxable.  Poster #22 said tax-free!  Look at it this way:  Savers already are supporting the debitors and banks.  They need some type of tax break.
  |     |   Comment #23
So how does the company offering the higher yield profit from just seemingly brokering an account to the bank of my choice?  I suspect that my account is then "assigned" or they do a third party pledge to cover a loan back to the company thus allowing them to borrow my funds.  Of course, I would have had to have signed the pledge agreement.  However, should company fail to pay off the loan upon maturity, the bank has the option to convert the account and pay off the loan.  I thus end up with nothing.  Because I agreed to assign the account to the company and allow them to borrow against it, I would therefore seemingly have cause of action against either them or the bank.

 Additonally, I would be surprised that any bank would allow a third party to complete "their" paperwork for them.  The bank has numerous responsibilities for identifying the owner of the account as it relates to the Patriots Act.

Two old adages seem to apply here:

1.  You get in bed with dogs... you get fleas.

2.  If it's to good to be true, it is.


Be cautious, the reluctance to discuss over the phone should be a huge clue to be aware.

  |     |   Comment #34
Wow. I'm in no way defending sun cities, but this is a huge assumption. I think their high rates are just a way to get people into their offices. The company relies on the sales people to deliver a value-added pitch to sell other, more lucrative investments. The couple hundred bucks is a drop in the bucket if you have talented sales people gaining the larger wallet-share through this marketing "ploy". I doubt this is a scam, but just expect to be sold-to by an aggressive salesperson is all.
  |     |   Comment #24
I am blown away at the amount of trolls these fraudsters have on their payrolls. Enjoy your meals, but beware - lay down your hard earned cash on their table and kiss it goodbye. Here's a thought, spend some Q-time with pops in the nursing home or go buy a happy day present for your grand kids instead. Geeze ppl
Rob of NY
  |     |   Comment #25
I notice their website has not been updated in 3 years. Quite primitive - looks like it was created to be a short term endeavor. Wonder how many people that opened one of their CD's were happy with their purchase and follow up?
  |     |   Comment #28
They have the highest opinion from the Better Business Bureau and so do I since I earn more interest by going to Sun Cities Financial Group
Justin Case
  |     |   Comment #40
The BBB is worthless. I bought a service, paid up front. When it was never performed, I went to the office to find it empty. I went to BBB, they said they hadn't had any complaints. They called the number and found it was disconnected. They told me I'd have to through small claims court, which I did. I went back to BBB a few months later, asked about the business, and they again said they had heard no complaints. Worthless.
  |     |   Comment #41
BBB is in business b/c of it's paying clients...business.
  |     |   Comment #30
Okay, here's the deal folks:
1.) A reputable bank or brokerage firm routinely posts their CD rates, minimum deposit amount openly on their website, also they disseminate the info to bankrate.com and at the very least they will tell you their rates when you call to inquire.  The fact that they won't reveal the specifics of their CD offering unless you physically show up and meet with them is a huge red flag that there's something fishy going on.

2.) Everyone is wondering how they make money if they are paying you a bonus above and beyond what the actual FDIC-insured bank is paying on the CD.  Essentially, they are compiling a "suckers list" of people who are not very sophisticated with financial matters but who have some cash to plunk down on the table.  When you come in for your appointment, the nice lady will be sure to ask lots of questions about what other funds you have besides the $25K.

3.) As shown in the example in the article, they are offering you 4.5% on a $25K 6 month CD but the interest rate is actually only 1.25% annualized ($156) and the remaining 3.25% ($406) is paid as a bonus from Sun Cities Financial.  The way they make their money is that once the 6 months is up, they have you as a captive audience to sell you an annuity or some other product with super high hidden fees.  They pitch it to you showing you another "amazing" rate of return (which, as we all know, is really your own principal being paid back to you but it's so convoluted most people don't really understand it).  They will have already earned your trust with the results of the 6 month CD so you will be all buttered up for the long con.  They'll start calling you well in advance of the maturity date and will have you back in the office to get it all wrapped up before that day comes.

4.) If you walk out the door at the end of your 6 month CD with your extra $406 in your pocket and you have the fortitude to resist the charms of their sales people when they try to sell you the annuity, then great, you made a little extra cash.  Go buy yourself a nice steak dinner.  No one's going to get rich on $406.  Your principal is most likely secure since it is held at the bank (not at Sun Cities Financial).  Whether you actually get the $406 bonus probably depends on whether they are still in business in 6 months.  On the other hand, if you get suckered into an annuity with this company, then you will be giving them back the $406 and many thousands more, to be sure.  They are not in business to hand out free bonuses.  Be prepared for the inevitable hard sale.
  |     |   Comment #31
Use to go to time-share sales events, vegas land sales, etc....for the freebees...like a revival meeting.  Great energy but one has to learn to say "no."  Recommend "everyone" go to something like this to learn "their" trade and how to say no.
  |     |   Comment #37
The BBB are about to from ME. I went in for a Sun Cities pitch. It took about half-an-hour. They pushed hardest on what they called a CD, but was a very carefully disguised fixed annuity. It was so carefully disguised the I did not recognize it for what it was until they told me that there were very high penalties for removing my money in less than ten years. It turned out to be a terrible annuity as well. Its only advantage over much better products was that it was FDIC insured. So when I focused the salesman on the alternative, which was a traditional CD, I discovered that only $15,000 of the $250,000 I was prepared to invest would receive the bonus. So just $15K would receive the 4.75% while the rest would receive just 1.85%. Now don’t get me wrong. There is nothing wrong with 1.85%, and the bank that offered it should be commended. But Sun Cities is committing a borderline fraud with their bait and switch tactics. I urge anyone reading this to heed the advice in the main article.
  |     |   Comment #38
Why would anyone do business with a firm run by Jeff Katz given his history when you can deal directly with so many reputable banks?
  |     |   Comment #39
Why would anyone do business with anyone that uses Equifax?
  |     |   Comment #42
Please read the FINRA articles mentioned in comment #38. They are devastating to Sun Cities
Financial. I was considering investing with them before I went to the FINRA website and read
these articles.
  |     |   Comment #45
They dont mention Sun Cities in those articles.

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