Closing Older Cds To Extend Maturity Date

blazer9 | Mar 9, 2020 | 228 posts since 2019

With the talk of CU and Banks starting to not allow funds to AddOn CDs,

Are early W/Ds on anyone's mind?

In the month of June i have 300k at 3%+ maturing. 180 day penalties.

Would anybody cash out now to guarantee deposits to 3yr to 5y AddOn

CDs at 3 to 3.5% ?? You know, MACU, GTE, PSECU.

Rates look to be in high jeopardy and am wondering if taking the hit now

under my control, verses no good place for funds to go for interest later.

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Answers

alan1 | Mar 10, 2020 | 877 posts since 2015

blazer9 -- I would not close 3% CDs that mature in 3 months, for the purpose of _adding_ to existing CDs. (But I'm not you.)

The reason is that if an institution chooses to terminate the add-on provision, it's _supposed_ to furnish thirty days notice. And you can then think about closing your 3% CD to fund additional deposits within that thirty-day period. No need to do so now.

However, I remember that Valor Credit Union terminated their add-on provision without notice. Complaints were filed with the NCUA. The matter was resolved by the NCUA, with Valor sending out thirty day notices and people having the opportunity to add to their Valor CDs. But the complaint process lasted for several months. So, that situation _could_ be replicated by another institution.

But I think (and I might be wrong) that it's unlikely that you'll get caught up in such a situation before your 3% CD matures.

I would hold on to that CD, but it ain't mine -- your $$, your choice.

Kaight | Mar 10, 2020 | 1,192 posts since 2011

That is my approach, as well. You beat me to posting by less than an hour. But thirty days provides sufficient notice to close an existing CD and move the funds into your (soon to close) add-on. Beyond that:

Right or wrong I am for certain in the mode of extending maturities to lock in APYs. Last thing I want is short term CDs. Some of that gets into politics, so I cannot elucidate here.

111 | Mar 10, 2020 | 672 posts since 2019

Alan1 - Yes, the 30-day period has sometimes been ignored by financial institutions. An example would be GTE CU's INITIAL move last Fall to seriously dial back the add-on provisions of their “Promotional Add-On Certificates” offered for several months last year.

Here is the email I received from them on October 2, 2019 -

" Dear (member),

GTE Financial has updated the terms of its Add-On Certificates effective 9/29/2019. You can now utilize the add-on feature to deposit up to $6,000 per year, per certificate, for each year of the term. Your rate and term will remain the same.

Thank you for being a GTE Financial member.

If you have any questions regarding your account, reach out to Member Care at 1.813.871.2690 from 7am to 8pm, or you may reach us at gtefinancial.org/livechat "

Note that their intended “effective date” was 9/29/19. Nice, eh?

As most of us here know, not long after that they were “convinced” - or in any case, they decided - to back off this radical change. (I received their email stating that on October 3, 2019.)

So, there's always a risk of some size that a FI will cancel their commitment to an add-on provision, and as you mentioned, that risk is up to each investor/ depositor to assess.

JWARREN | Mar 9, 2020 | 69 posts since 2017

It did sting bit but I broke 3 CDs scheduled to mature in June and October today. Only time will tell if it was a good move.

Robb | Mar 9, 2020 | 322 posts since 2018

I've been considering it as well. I have one CD due to mature in early 2021 and thinking about using it as a source of funds for other CD's. My break even will be about 1 year given the 6 month penalty but will pay off in the out years with the add-on CD's running into 2024/2025 MACU being one of them.

RJM_Willy12 | Mar 10, 2020 | 149 posts since 2016

Be aware, banks can change ANY terms with 30 days notice.

INCLUDING extending the maturity date by decades, and lowering the interest rate to 0%, or NEGATIVE.

Also, there are opt in provisions, which allow financial companies to convert their debt (your CD) to their capital - shareholdings.

These are all complicated issues, but thanks to the fine folk here, the real risks can be analyzed and subsimated.

pgroove_fan | Mar 10, 2020 | 168 posts since 2019

MACU's cap of $100K on combined growth certificates makes them less useful for your purposes.

The "trickle" nature of PSECU's add-on makes them a tough fit as well. While some DA users have reported that CSR's have said "oh, add on anytime," I truly doubt that PSECU is going to allow you to drop a sudden $300K onto your existing high-rate certificate.

GTE I have no experience with. But as other have noted, they already tried to get out of the add-on commitment. Hopefully it will persist for you until June, or you'll get the 30 days that so many others are talking about.

cdqueen | Mar 10, 2020 | 78 posts since 2016

blazer9 -- No! As with the 1. vaquita and 2. saola respectively topping Earth's planetary endangered species list, these rates/products are finite, disappearing fast and once extinct may never be seen again.

blazer9 | Mar 10, 2020 | 228 posts since 2019

I'd like to give thanks for the comments posted so far.

Though I have a low post count ( re-registered do to harassment from former members ) I have been here quite some time so I'm aware of the problems we've had.
I agree with the advice from you all. Like most I really count on the income from the high % CDs we've accumulated over the years. PenFed 5% 10 yr to mention one. That ends 1.1.21 for me.

A little back-up thinking from ya'll helps

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