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Does Penfeds CD Policy Cheat Us Out Of A Days Interest?

Jack11
  |     |   194 posts since 2019

My final penfed CD matured on the first. I had it set to transfer to the savings on the first. But it did not happen until the 2nd. I seem to recall a similar problem with a prior CD.

Probably not worth pursuing but why do they do that? Is it even legal?

On the topic of penfed, todays transfer out will leave me with just the $5 minimum. Does anyone know if they have any inactivity fees?

I have a local CU that charges $5 if you go 6 months with no activity so I have to manually transfer a penny in every now and again.

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Answers
Kaight
  |     |   425 posts since 2011
I have run into this situation elsewhere. It is not an intentional money grab in my view. It is, instead, a failure of IT at some (not all) financial institutions. In my experience there is a way around this. But you must telephone the financial institution on the day of maturity and ask to have your funds moved to your savings or checking. If your maturity day happens to be on a Sunday you're in trouble. But once the funds are in an account you can access via ACH, or with a paper check, you are on your way to withdrawal.
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me1004
  |     |   1,013 posts since 2010
Glad to hear I'm not the only one who finds such delay practices unfair, even if notified in disclosures. You locked your money up until maturity, not until maturity plus an extra free day. If its still locked up, it should get another day of interst. I'm presuming that if you have, say, a 1-year CD, or a 365-day CD, the maturity date was the last day of one calendar year, as in 365 days. If they want one more day, they should call it a 366-day CD and pay for that day.

I have come across some places that say it has to be done like this because if you were to close the CD before the end of the day of maturity, you would not get interest for the maturity day.

This can be very singificant money for the financial institution mutiplied by all the CD accounts. It can even be notable for the individual. Imagine if you had the max NCUA amount of $250,000 in it, and in better times you were getting 3.5% interest, that would be a loss of almost $24 for that one day! But actually, it would be a loss of the interest you would get at a new CD, which might be even more.

I have come across this issue at some other places, but not at all. There needs to be a standard for this, and everyone has to handle it the same. I encourage you to follow Alan1's advice to contact the NCUA and ask into it. And if you do, please come back and let us knwo what they said.
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Ally6770
  |     |   2,983 posts since 2010
I would assume the transaction was not done on the 1st because it was not open for business. It was a holiday. Even pension deposits by law are not put on the first if it is a legal holiday but on the next business day after the legal holiday. So all the deposits will not be put into the accounts until the 4th. Even the stimulus check will not be put in until Monday the 4th.
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alan1
  |     |   538 posts since 2015
From the PenFed website:

9. When will the proceeds of my maturing Certificate be available for withdrawal?
Maturing Certificate proceeds will be available on the business day following the maturity date of your certificate.
https://www.penfed.org/accounts/money-market-certificate

So, even if the certificate matures on a business day, the funds will not be available on the maturity date.

As to the original poster's question re the legality of PenFed's policy: I happen to be a retired attorney who did not specialize in banking law. I have not conducted research as to the legality of PenFed's policy. I will therefore express no opinion on that question.

I will note that my PenFed "Money Market Share Certificate Agreement" states:

"Maturity Date: Funds are available for withdrawal the business day followng this date."

If I had any questions concerning the legality of PenFed's policy, I would contact a specialist at the National Credit Union Administration to gain the benefit of that person's knowledge. In my experience, the NCUA specialists are outstanding.
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Jack11
  |     |   194 posts since 2019
Yes, I guess their fine print allows them to steal a days interest. And last time, It was not a holiday or weekend. I have never ran into this anywhere else. The penfed one was a 10 year at 5%. But I have a couple from CD Bank that mature in May. Physical checks only. But I knew that going in. They are not even close to competitive anymore.
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lou
  |     |   793 posts since 2010
I don't like this policy of releasing CD funds a day after the CD matures, but in this case it was unavoidable. The certificates matured on Jan 1 (Friday) a holiday, so the first business day the funds could be redeployed elsewhere was Monday the 4th. Three days of lost interest because of the holiday weekend.
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Jack11
  |     |   194 posts since 2019
Mine was set to auto transfer to the savings and it did that on the 2nd. It did not wait for a business day.
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