Bank or Credit Union Criteria for CD purchases?

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Bank or Credit Union Criteria for CD purchases?

Postby RooseveltG » Thu Dec 20, 2012 2:54 pm

Many posters on this site recommend Pen Fed or Ally Bank for CD purchases. An investor requiring multiple jumbo CDs would need to invest with many banks and credit unions that are not well known.

Are there any criteria to choosing an institution other than selecting one with FDIC insurance and the highest rates?

Thanks in advance.

Roosevelt.
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Re: Bank or Credit Union Criteria for CD purchases?

Postby tfb » Thu Dec 20, 2012 3:27 pm

RooseveltG wrote:Are there any criteria to choosing an institution other than selecting one with FDIC insurance and the highest rates?

Ability to join if it's a credit union. Someone mentioned American Airlines Credit Union paying high rates but most can't join. Passing financial strength (doesn't have to be the strongest, just not too fragile). If the institution fails, you get your money back but you may be forced to reinvest at lower then-current rate.
Harry Sit, taking a break from the forums.
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Re: Bank or Credit Union Criteria for CD purchases?

Postby john94549 » Thu Dec 20, 2012 3:39 pm

For all practical purposes, NCUA insurance coverage (credit unions) is equivalent to FDIC insurance coverage (banks). That said, you may find a credit union with so-called "private" insurance, offered by ASI. Many folks (including yours truly) feel, well, less than comfortable with anything less than "full faith and credit" NCUA/FDIC coverage.

Moving right along, I am also less than comfortable with banks or credit unions with poor ratings (you can find more info on this over at http://www.depositaccounts.com, where Ken Tumin often discusses such arcane details such as "Texas ratios"). Even if a CD is federally-guaranteed, should the bank or credit union go belly-up, your CD is subject to re-pricing by the acquiring institution (i.e., bye-bye to that good rate and term, most often). If no acquirer can be found, you get a check for principal and accrued interest, and have to find a place to plop the funds (post-haste, if an IRA CD).

If you have IRA CDs and are over 59 1/2 (as I am), you should look at PenFed. They allow partial withdrawals from IRA CDs without penalty for early withdrawal. Northwest FCU and StateFarmBank do as well, but PenFed's rates tend to be better. Some financial institutions don't allow partial withdrawals, period. I think Ally is in that category.

Of less concern (to me, at least) is customer service. I usually deal with the financial institution only twice, when buying and redeeming. But little things count. For example, if you are contemplating a custodian-to-custodian IRA CD transfer, will the new custodian (the bank or CU to which you are transferring the funds) lock the rate and term upon application? If not, and the rate and/or term evaporate before your funds arrive, you could be in for a rude shock.* And sometimes you just have a question about your account, so you might want to avoid a financial institution with a toll-free number that routes you to a 20-minute wait (I could name names; PM me).

*For example, you want that 5-year CD at 2% for your ladder. You fill out all the forms, send them to the prospective custodian, who sends them to the current custodian, who cranks out the money upon maturity and snail-mails the check to the new custodian. By the time the check hits the "CD desk" at the new custodian, "poof", like magic, that 5-year CD is now at 1.5%. Now what? To avoid this, I always get written confirmation of a rate-lock and (belts and suspenders) send a very, very clear cover letter with any transfer request that, should the rate and term I want not be locked, the transfer request is withdrawn.
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Re: Bank or Credit Union Criteria for CD purchases?

Postby dratkinson » Thu Dec 20, 2012 5:13 pm

RooseveltG wrote:Many posters on this site recommend Pen Fed or Ally Bank for CD purchases. An investor requiring multiple jumbo CDs would need to invest with many banks and credit unions that are not well known.

Are there any criteria to choosing an institution other than selecting one with FDIC insurance and the highest rates?

Thanks in advance.

Roosevelt.


A recent poster told us about the CD Account Registry Service, whereby one institution accepts your large deposit and spreads it around for you. You get one statement showing all of your CDs at one rate---probably not the highest. Sounded interesting. Searched and learned I have a locale source for this service. (Not that I need it.)

CDARS: http://www.cdars.com/
d.r.a, not dr.a.
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Re: Bank or Credit Union Criteria for CD purchases?

Postby Leesbro63 » Fri Dec 21, 2012 3:08 pm

I'm generally not paranoid, but a middle-man company, taking multi-million dollars, then buying FDIC CDs for me...I'd worry about that.
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