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EWP...Tips For Negotiating 6 Month Penalty

chipcollector
  |     |   111 posts since 2010

Hello all:

Last week I received a lot of helpful information from the readers here when I was attempting to help a neighbor deal with some low coupon long term CD's at Navy Federal.

Got great info here and my neighbor improved his position substantially and it will make a difference for him.

The second part of his situation relates to a small credit union in Tampa where he also has a lower coupon CD.

Although this situation is a bit better as the stated EWP is only 6 months where Navy Federal initially told him the penalty was one year.

We are all set with Navy Federal.

Moving on to his other CD that pays 3.4%.

This credit union has a 6 month EWP and there does not appear to be a similar situation where the balance can be transferred to a higher coupon CD with a short term.

Any suggestions on how to deal with this CD?

It would seem that if he pays the 6 month EWP and he re-invests the principal at 5% there would be only a minimal, if any gain over waiting till the current CD matures in 14 months.

I asked about a loan against the CD but they want 2% over the 3.4% rate so that won't work.

Any suggestions???

TIA !

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JeffinEasternFL
  |     |   744 posts since 2020
Use the calculator on this site (the tax benefit of breaking is just bonus...) If it's not advantageous, take at least the interest quarterly and place it elsewhere at a higher rate. (Is this Suncoast CU by chance??)
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chipcollector
  |     |   111 posts since 2010
Hi Jeff

Suncoast sounds right. I will double check with my neighbor. If it is Suncoast is that good or bad?
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JeffinEasternFL
  |     |   744 posts since 2020
they seemed like ok folks, had a CD there in the lean interest years...(like 2.3% APY for 5 years). ask about a waiver or EWT but, check if they have anything else worthy of putting the $$ into. You can get 5%+ APY now from a couple thru 5 years!
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chipcollector
  |     |   111 posts since 2010
They were pleasant on the phone but did not have anything attractive to offer.
Will ask my neighbor if he wants to pursue a waiver request. Good suggestion
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Sanger
  |     |   321 posts since 2022
Hi JeffinEasternFL I have a question I have a CD that I took out in August of 2020 for five years! the rate is 2.12 % I saw their rate now is 4.33% for five years I told them I want that new rate, but they said the penalty is 2073.00 to get the new rate. I came back at them and said no Penalty please they are going to let me know any time it is $200,000 I told if they do not forfeit the penalty, I rather move the money and get a better rate at least 5% it is up to them what do you think .
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JeffinEasternFL
  |     |   744 posts since 2020
1st: run the calculator and see what makes sense (keep it or take EWP and reinvest for 3 years at 5%+, 4 years at 5% or 5 years at just over 5%APY?), if it is "close" then what's the bet? Me: I'd take 5%+ now for 5yrs guaranteed interest (if I needed income) vice the unknown APY later when this CD matures (the tax benefit is just marginal factor in the decision). If they won't help you at your bank /CU and the calculator says so: then MOVE the money, simple as that...
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Sanger
  |     |   321 posts since 2022
Thank you JeffinEasternFL for getting back to me they did not wave the penalty. I went ahead and closed it .
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chipcollector
  |     |   111 posts since 2010
which institution are you dealing with if I may ask?
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Sanger
  |     |   321 posts since 2022
Hi chipcollector the credit union I was dealing with is Sandia Laboratory federal credit union I am moving the money to Credit Human .
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chipcollector
  |     |   111 posts since 2010
Thanks for the response.
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Sanger
  |     |   321 posts since 2022
One more thing chipcollector Sandia said they would move my CD and give me a new rate of 4% for 13 months with no penalty no way.
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Sanger
  |     |   321 posts since 2022
Hi chipcollector this is a different CD that I had the rate at Sandia the rate is 1.35 % I took this one out in August of 2020 the new rate is from credit Human is 5.50 % for 35 months I could not wait the Penalty is. 665,75
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njs
  |     |   71 posts since 2019
I cashed out a cd in Feb with a six month ewp. The penalty was only 600 and I put it in treasuries. I have several cds matuing the first quarter of 2024 which at current rates the ewp is prohibitive. It really depends on where you think rates will be in 14 months. It might be worth it if you can lock in a 60 month at close to 5%. The current thinking is rates are going to drop next year.
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chipcollector
  |     |   111 posts since 2010
Thanks for the reply. I agree that rates are expected to
decline so locking into a 5% CD now would be great for this couple. They need all the income they can get??
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betaguy
  |     |   181 posts since 2022
"The current thinking is rates are going to drop next year."
says who? The media?
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chipcollector
  |     |   111 posts since 2010
I guess it's what the "experts" are saying on CNBC. I guess it makes sense.
After the FED ruins the economy they will have to cut rates and try to stimulate the ruined economy
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JeffinEasternFL
  |     |   744 posts since 2020
If I had to bet, in 14 mos, I'd say lower rates (possible recession or the Fed has tightened enough and paused)
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MY2CENTSWORTH
  |     |   440 posts since 2016
Chipcollector, I read your post and sent a private message to you prior to reading any of the comments from other DA users so I'm not sure if there is anything different I can offer up, but please feel free to PM me if you wish.
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chipcollector
  |     |   111 posts since 2010
Thanks. Got your PM. Will talk to my neighbor tomorrow. Going to see if he wants to pursue a EWP waiver
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fred_b
  |     |   172 posts since 2022
I also have a couple of 5 year CD's with Suncoast CU with a 6 month EWP. The 3.5% one matures in June 2024 (so about 14 months left) and the 3.2% one matures in August 2024.

Note that Suncoast allows one bump on these 5 year CD's if they are $100K+. But their 5 year APY is currently only 3.55%. I've been hanging on hoping they would raise the 5 year rate to maybe 4%.

I'm undecided on whether to pay the EWP and open a 5 year CD elsewhere at 5%. But it's going to take about 11 months just to recover the EWP and I only have 14-16 months left until maturity.

I know rates may be lower by summer of 2024 so that would suggest bailing out now. I'm not sure it's a no-brainer, especially with the chance (maybe remote) that Suncoast will increase their 5 year rate.
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JeffinEasternFL
  |     |   744 posts since 2020
Always: Run the EWP calculator on this site!

As of now you can get 5%++ APY for 3ish years (Savebetter, Quorum, Credit Human, etc) 5% APY (w/ University CU) for 4 years and 5%+ APY with All In CU.

The best alternative is some sort of ladder that allows you flexibility depending on rates when they mature, so spread out the maturity dates a bit! at least 6 mos or 9 mos to 12 mos-ish (even better), or even as long as 15-20 mos, etc.,

My personal ladder gives me over 5% now at just over 2+ years (Savebetter), again at 4 years (University CU) and at 5 years 5.05%, (All In CU)! By next week I hope to add in (Quorum) 5.25% APY at 3 years as well! Throw in my Space coast 3% CD maturing at summer '24 (where I take the interest quarterly due to 730-day EWP and dump it to MboI Money Market Checking at 4.5%) for a nice jumbo ladder that will yield me close to / about $55K~ a year in 1st year interest!
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chipcollector
  |     |   111 posts since 2010
Hi Jeff:

Thanks for the reply. My neighbor said he would think about asking for the waiver of the EWP
but did not seemed excited about it. I explained to him that there was a tax benefit to paying the EWP that would pay, perhaps 20% (or more) of the EWP (not sure what his tax bracket is but I am assuming it must be around 20% at least. Appreciate the insight
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JeffinEasternFL
  |     |   744 posts since 2020
Better check his bracket, are you sure it's not (marginal) 12 or 15% ish? The tax benefit of an EWP is minimal but, it also isn't "charity"; the bank will hold your $$ for a longer period with a new CD than the original CD but, at a better rate for you but, below competition rates. Know that!
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chipcollector
  |     |   111 posts since 2010
Hi fred. Thanks for the response. Ran the "waiver" idea past my neighbor today.
He was sort of lukewarm toward the idea (he didn't want to ask for "charity" as he termed it).
I left him with that he would think about it overnight.
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TheRealMAGA
  |     |   23 posts since 2023
Chipcollector, fat chance you’re going to have any bank or cu waive ewp. Why, because it’s their bread and butter just like all their other fees.
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chipcollector
  |     |   111 posts since 2010
I think u are right. but if my neighbor decides to ask I will let the community know
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MY2CENTSWORTH
  |     |   440 posts since 2016
TheRealMAGA, you must not have been following all the discussions here at DA in the past few months pertaining to some of the FI's that were indeed allowing changes/closures to current held certificates in this most recent rate increase environment without charging any fees or EWP's. I have personally accomplished that numerous times at Navy FCU (6), Andrews FCU (1 Traditional IRA/1 Roth IRA) and GTE (5) very easily using secure messaging, live chat and/or a simple phone call. Furthermore, at 71 years of age I have never paid a bank/credit union fee or ever, prior to this year, closed or had changes made to a CD prior to maturity. Of course a little bit of good luck, prior planning, organization, a solid understanding of how living within your means goes a long way and is always the best course of action whenever this highway of life makes that possible.
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SouthernGirl
  |     |   210 posts since 2022
chipcollector,
Search box SunCoast Credit Union, Go to view all posts from 2019. 4/7 Suncoast CU 5 years 3.50%.
Ken Tumin comment, click "this blog post" and read EWP section. " but the principal will not be touched"
If the neighbor has been receiving the dividends monthly and SunCoast discloses, principal will remain intact and principal will not be touched, it appears that SunCoast takes an EWP from dividends only. If dividends are gone, as in this case, how can they take an EWP from principal that is not disclosed?
I would plain and simple ask for a closing withdrawal amount and do not ask about a penalty. If you agree with the closing withdrawal amount, then close it. When is the interest posted for the month of March? You may lose one month interest if you close it on 03/31/23 as the EWP. I would probably try to close on 04/03/23 for that reason. Your case to SunCoast is that you have documents that state penalties are taken from dividends earned only and not taken from principal.  
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chipcollector
  |     |   111 posts since 2010
Wow SouthernGirl!

I will certainly look at that !

Thanks for the reply!!!!
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JeffinEasternFL
  |     |   744 posts since 2020
Note: I had a CD w/ Suncoast but, this did not work, somewhere in all the fine print paperwork (hardcopy), they did take principal toward EWP. But, do try first!
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chipcollector
  |     |   111 posts since 2010
I am going to my neighbors house this AM to tell him.
I am quite sure that he will want to try it.
Wonder if somewhere along the way, they changed their policy?????
Maybe a complaint to the paper tigers at CFPB might help ?
This is really a great community. I would never know any of this
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SouthernGirl
  |     |   210 posts since 2022
chipcollector,
Please obtain the Truth-In-Savings Disclosure in effect in 2019 and that is the disclosure that SunCoast CU has to follow for EWP on the CD. I am certain the verbiage is there, to calculate EWP from dividends only, based on Ken Tumins write up in 2019. SunCoast CU can provide it to you and they need to show you where the 2019 disclosure states EWP is taken from principal. 
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chipcollector
  |     |   111 posts since 2010
will do or at least will ask for it

going to my neighbors house in a few minutes.

he is the one with the cd
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chipcollector
  |     |   111 posts since 2010
I called Suncoast with my neighbor. They will be sending me the 2019 version of the Truth-in-Savings disclosure via email in next 5 days once they research it.
Here is something interesting. While we were on hold, I noticed that the same disclosure appears on their current webpage:

**Membership qualification and account opening required. For all Certificate products: Annual Percentage Yield (APY) accurate as of 03/31/2023. Rates subject to change without notice. APY assumes dividends remain on deposit until maturity date. Penalty will or may be imposed for early withdrawal with no loss of initial investment: 90 days of dividends on terms of 12 months or less; 180 days of dividends on terms longer than 12 months. Fees may reduce earnings. Dividends are compounded daily and credited monthly. For all other savings products: Annual Percentage Yield (APY) accurate as of 03/31/2023. Rates may change at any time without prior notice after the account is opened. Fees may reduce earnings. APY determined at time of funding.

Stay tuned and thanks!
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chipcollector
  |     |   111 posts since 2010
Update: Called Suncoast. Notwithstanding the language " with no loss of initial investment " they will not break CD without the 6 mo penalty. I've convinced my neighbor to file complaint with State of Florida and CFPB. Will update community

Many thanks to those who replied
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JeffinEasternFL
  |     |   744 posts since 2020
they refused the same for me this past winter of a 4-year CD and I went ahead, liquidated, took the EWP and will have the (small) tax benefit. Still: keep us posted on how this all works out! Thanx...
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chipcollector
  |     |   111 posts since 2010
will do!

thanks!!!
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