Always Withdrawing CD Early

Intugumbo | Nov 30, 2020 | 41 posts since 2019

Would a bank or credit union get pissed and eventually stop doing business with you if you bought many 7 month CD but and withdrew them after 3 months? Early withdrawal penalties a side.

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Answers

Kaight | Nov 30, 2020 | 1,192 posts since 2011

Financial institutions have a right to anticipate early withdrawals will be the exception and not the rule. I think they would tolerate only just so much of such shenanigans. Now exactly how much will vary depending on the management of whichever financial institution it happens to be.

Choice | Nov 30, 2020 | 937 posts since 2020

FI provide a depositor with a put by having EWPs or not having any EWP. If a FI wants to limit exercise of that put then they should not provide it from the get-go. Otherwise they are failing to disclose the downside of their foolishness in granting/exercising their put...

RickZ | Nov 30, 2020 | 218 posts since 2010

Intugumbo, Without having all the facts, I think the short answer is that it depends on why you're doing this. If the FI believes you're abusing the system then they definitely won't be pleased and may very well ban you. So that I don’t make any incorrect assumptions, let me ask you two questions.

Is the primary reason you're opening these CDs to get credit card reward points? There’s clearly nothing wrong with that - I’ve done it many times.

If the answer to the first question is a yes, then is the real reason that you're closing these CDs early so that you can cycle funds to pay off the next upcoming credit card bill?

111 | Nov 30, 2020 | 672 posts since 2019

Which bank or credit union are you thinking about?

blazer9 | Nov 30, 2020 | 228 posts since 2019

And you are going to use a credit card for purchase?

Intugumbo | Nov 30, 2020 | 41 posts since 2019

@111 Which bank or credit union are you thinking about?

I would prefer to keep this to myself. I prefer to invest in CDs in three month chunks. Some banks have minimum 6-7 month terms with a EWP three months interest. I figure if withdrawn early 3-4 months would get me the 3 months I wanted to start with.

@Choice
Bank is going to bank. Common since be damned.

@blazer9
And you are going to use a credit card for purchase?

If it is an option and I can verify that it will not code as cash advanced.

Duck | Nov 30, 2020 | 111 posts since 2010

Intugumbo so as I understand this correctly so you take a cd for no monetarily gain just leaving it there for 3m???. You must be kidding me you do understand that the penalty you pay is out of Earned Interest not interest you have not accrued which depending on the fi they can AND will take your principle that is the amount of $$$ you put there btw. Good luck with that

NYCDoug | Dec 4, 2020 | 334 posts since 2011

I suppose if the earned interest is next to nothing, then it might be worthwhile to abort the CD prematurely, freeing up funds (minus the miniscule penalty) to wash, rinse & repeat. [Presuming another credit card reward is in the offing]

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