Julieta7 wrote: ↑
Tue Nov 12, 2019 6:43 pm
Here is the fine print from the Equitable Savings & Loan Association 120 Month CD:
Interest credited to the account during any term may be withdrawn at any time during such term without penalty.
OK, but that's not what you said the rep at the local branch told you. You said the rep told you that the EWP was charged on the interest withdrawn.
If the account is renewed at the same interest rate, earnings during the preceding term, as well as the current term, may be withdrawn at any time without penalty during the renewal term. If the renewal term interest rate is different, only earnings for the renewal term may be withdrawn at any time without penalty during such term.
This one is kind of weird, but not really relevant now if we're talking about opening up a new CD.
"Withdrawals of principal before maturity may be permitted but the following early withdrawal penalties may be imposed.
Again, not what you told us the local branch rep said, which was that no withdrawals of principal are allowed at all.
In the event of any withdrawal of principal from the account prior to a maturity date, the accountholder shall forfeit an amount equal to 3 months of interest whether earned or not, on the amount withdrawn regardless of the length of time the funds withdrawn has remained in the account.
OK, so far so good--this is typical.
If the withdrawal subject to penalty occurs after 3 months from the opening date or last renewal date, whichever is the most recent, an additional penalty will be charged. This additional penalty will be equal to the earnings accrued to the date of withdrawal (less 3 months) minus earnings to the date of withdrawal (less 3 months) at the then current rate of the Regular Passbook (or similar) savings account.
And this pretty much contradicts the previous statement, except for a narrow window after opening (or renewing) the CD, and is a very bizarre EWP. It's completely unknowable in advance. If this S&L has a history of very low savings account rates, then the penalty is likely to be draconian.
Any withdrawal which reduces the account balance below the Minimum Balance Requirement, or any change in the term or Rate of Earnings, shall be considered as a withdrawal of the entire account balance and shall be subject to the penalty prescribed herein.
What is the minimum balance requirement (MBR), and what's the point of this clause unless there is no penalty if a withdrawal does not reduce the account balance below the MBR?
The penalty will not be imposed for withdrawal of principal following the death or adjudication of incompetence of any accountholder."
This is pretty typical.
This is one of the most poorly written and confusing early withdrawal disclosures I've ever read. I'm still not sure I understand it exactly, but if I am understanding it, I would never buy this CD unless I simply planned to hold it to maturity, which is my approach with brokered CDs (due to high bid/ask spreads).