Advertising Disclosure
  1. Home
  2. Community
  3. Ask
  4. WARNING!! Hidden Way Banks/Cus Can NOT Pay You Interest For 3 Months Of Your CD!

WARNING!! Hidden Way Banks/Cus Can NOT Pay You Interest For 3 Months Of Your CD!

racecar
  |     |   616 posts since 2014

Was looking into perhaps joining Chartway FCU (easy to join thru association). What was appealing was that their CDs could be set at ANY length of months (instead of "JUST" 12, 24, 36, 48, 60). In other words, you could have a 26 month CD instead of a 24 month CD.

However, there's a real sneaky way they've chosen to rip you off. At Chartway, all dividends are compounded QUARTERLY. This means every 3 months. So if your CD has a term divisible by 3, you're okay (ie, a 24mo CD would pay interest for 24mos). However... if you have a 25 or 26mo CD, you're just locking your money up with NO ADDITIONAL INTEREST.

Some places which have monthly or quarterly (rather than daily) compounding, state clearly that dividends are applied monthly/quarterly -- "and at maturity of the term", so you won't lose anything (Alliant is one such example -- at Alliant, you set your CD term in length of DAYS, and it will pay interest for each day you have the CD until maturity). But that seems to be the exception.

Because Chartway compounds quarterly, they only pay interest every 3 months -- and if your term is 4 months or 5 months (ie, 25 or 26 mos instead of 24 or 27) they don't pay you a penny extra for all that time your money is locked up.

How do I know this? Go to their site yourself.

https://www.chartway.com/save-and-plan/share-certificates.html

On their main "CD Rates" page, there's a calculator showing you the amount of interest you'll get for your CD (enter the amount, then the number of months, and you then press +/- to add or subtract the term length). In real-time, it shows you what your payout will be. If you enter 24mo, it shows you an amount. 25mo and 26mo shows you the SAME amount. Only when you hit 27mos does it change. Likewise, 28 and 29mo stays the same as 27mo, and only when you hit 30mo, does it go up.

Of course this COMPLETELY takes away the whole purpose for the "set your own date" CD, when the ONLY time it will pay interest on all the days you have it locked up, is if you set it in intervals of 3 months.

Pretty underhanded.

Places that do things right (like Alliant) will pay any leftover, due interest at the end of the term, if the term hasn't yet hit the "compounding" date yet. Apparently not Chartway. So beware, folks. This is something pretty well "hidden". When a bank or CU tells you your CD can be for any length, it's only natural to think that you'll be earning interest for the entire length of the CD. Not necessarily.

  Post an answer
6


Answers
MY2CENTSWORTH
  |     |   436 posts since 2016
Personally, if I was interested in opening an account like you describe I wouldn't simply make a determination such as you have after using their online calculator, I would at least call them to confirm your understanding of the terms. Truly, I have used other CU's for odd term accounts such as that and the interest/dividends were always paid in full at maturity.
Reply
12
thowellIII
  |     |   89 posts since 2015
Relax, Racecar. The interest is added to the principal or paid out the principal quarterly. Other FIs do so on a monthly basis. Some even will only add the principal at maturity for some accounts that have short maturities. But the amount of accrued but unpaid interest increases on a daily basis.

I have had CDs with Chartway of odd terms (and even a No Penalty CD that I closed in the middle of a month). There was no problem.

To be clear, it is the same as if you had a mortgage or other loan. The interest that is unpaid is added to your principal only on a monthly basis. If you were to prepay in the middle of the month based on the previous month's balance, you would still have some small amount of accrued interest that had not yet been added to the balance.
Reply
5
GH1
  |     |   1,054 posts since 2017
I believe thats only payout days. Your accuring interest everyday. It may not be compounding daily. But your accuring.
Reply
4
me1004
  |     |   1,379 posts since 2010
It appears to me that racecar is correct. I just looked over all I could find at Chartway's site, including the only disclosures, and all I can find is that interest does accrue daily, but you will not RECEIVE the accrued interest until it is posted:

5. ACCRUAL OF DIVIDENDS — For all earning accounts, dividends will begin to accrue on noncash deposits (e.g. checks) on the business day you make the deposit to your account. If you close your account before accrued dividends are credited, you will not receive the accrued dividends.

I find no place at the website where they ever say something like, "accrued interest on CDs is posted and paid out at maturity."

But yes, contacting them would be in order. And a disclosure definitively for the CDs is needed - nothing they say can be taken as fact, only what is written in the formal disclosures.

Yes, at first I found it hard to believe, I doubted raceway's assertion. But it appears to be true. I hope Ken does an article about this. I also hope someone files a complaint with the appropriate oversight agency, including about the posted APY. They are giving out false APYs if they are not paying out accrued interest at maturity, as they are providing the same APY whether you close at 12 months or 14 months -- and that is illegal. If they don't want to pay out the accrued interest, then they need to adjust their APY accordingly.

I have come across and known about some banks and CUs that do not give you any accrued interest if you withdraw before it is posted. But I did not think this applied to the final months in a CD at maturity.

I note, their disclosures at the Website might be for all products EXCEPT the CDs, it's difficult to tell. The disclosures list names of all the products, and do not say Share Certificates, although they do refer to "Custom Share," and I don't know if that means the flex CDs. But if it does, it says that rate can be changed at any time, and that is talking of all the accounts together, and in that context it has to be read to mean the "Custom Share" rate can be changed at any time the same as a regular share savings can be -- that is, the rate is not locked in. So maybe that isn't the CD. In that case, they post no disclosures about the CDs, so we can't tell if they handle interest when closing at maturity differently.

Until they say that interest is POSTED at maturity, or that all accrued interest is paid at maturity, we cannot presume that is the case. The only thing they say at the Website is that no accrued interest is paid if money is withdrawn before posted, and that interest is posted only quarterly.

And as raceway points out, the calculator on the CD page itself shows you get no additional interest posted when a maturity does not fall at the 3-month mark. Yes, that could be an error in their calculator, but they need to provide written disclosures for the CDs that specify what really happens. (I find it disturbing that no CD-specific disclosures can be found at the Website, yet they have a button for you to open a CD, and by law they must provide the disclosures before you open.) Until they do, the information they provide says you do not get those extra months of accrued interest. We CANNOT take someone's word for it that you get it, it must be in writing, clearly, in the legal disclosures.

This CU fails on two serious counts: no apparent CD-specific disclosures at the website, and a calculator for CDs that has the same APY for a 12-month CD as for a 14-month CD, yet gives an interest calculation indicating you get no accrued interest after the 12 months. And that backed up by the only information at the Website saying you do not get any accursed interest that has not been posted and it is posted only quarterly.
Reply
4
racecar
  |     |   616 posts since 2014
Called and spoke to someone at length at Chartway (took a long time to reach them, then a long time while they searched). She insisted that interest WOULD be paid at maturity, but said there was nothing they could send me in writing, and no disclosures (!!) stating that. She checked with multiple other parties and supervisors, spent about 45mins with me on the phone, but she said all I can do is tell you all interest to maturity will be paid, but couldn't offer anything written to back that up. She could only point to the main Account Disclosures page, which is very short, and as me1004 pointed out, talks about how you won't get interest between 3 month intervals if closed early, but doesn't state either way anything about maturity.

They "say" yes, with nothing written to back it up.
Their own online calculator shows "no"
Other institutions (like Alliant) clearly state in their disclosures that all interest to maturity will be paid, but there is no language stating that at Chartway (only language that basically says if you close it "before dividends are credited" you lose the interest).

So whether to believe it or not is up to you. Of course they can just not pay, and dismiss what anyone tells you over the phone that's not in writing, though people on the phone said they would. Sigh.
Reply
4
Duck
  |     |   111 posts since 2010
It's way to early for me after my day yesterday so I'm just going to ask what is your comprehension of interest yes they compound quarterly but your still going to get interest on your $$$
Reply
3
me1004
  |     |   1,379 posts since 2010
Thank you for that followup, racecar. Did you also tell them their calculator indicates otherwise? And, did they say they will fix that? And did they say they would get the disclosures fixed? And thank you, thowellIII, for sharing your experience.

Thowelllll's experience seems to confirm you will get the accrued interest at maturity -- but the CU still is negligent, and to the deposit's is detriment, to not have that stated in the disclosures. The lawyer who wrote it lacking that should be taken to task over it. And presuming Thowelllll's experience is not unique, so too should the tech guy who made the calculator -- unless he/she did it that way because of the lawyer's screwup, that is, he/she wasn't given different instructions.

We can only hope that some new CEO at the CU does not instead choose to go by the written disclosure, since any depositor has no worthwhile argument beyond that.

Racecar, I also commend you, that is a very good catch you found, even if Thowelllll's experience indicates the disclosures are deficient and misleading.
Reply
2
racecar
  |     |   616 posts since 2014
Glad to hear some experiences that the interest will be paid. But we all know that if they change their mind, there's nothing we can do, since it's not in writing anywhere about it paying to maturity. I did mention the online calculator showing no interest paid except every 3 months, the CSR said yes, she sees it as well, said she didn't know what to say. The online calc isn't difficult to fix -- in fact, it almost seems like they went out of the way to MAKE it only show interest every 3 months. At any rate, it's up to people whether to take a chance or not. Like with Alliant, they have a good EWP and flex terms (actually Alliant is even better, as Alliant lets you set it in days, not full months -- and specifies specifically that interest will be paid to the maturity date) but sometimes Chartway has a bit higher rates...
Reply
1


The financial institution, product, and APY (Annual Percentage Yield) data displayed on this website is gathered from various sources and may not reflect all of the offers available in your region. Although we strive to provide the most accurate data possible, we cannot guarantee its accuracy. The content displayed is for general information purposes only; always verify account details and availability with the financial institution before opening an account. Contact [email protected] to report inaccurate info or to request offers be included in this website. We are not affiliated with the financial institutions included in this website.