Auto CD renewal

[Astronaut4]

My elderly relative (for whom I have POA) has many CDs spread across several banks. When I began helping him with finances a few years back, I urged him to let the CDs renew automatically. Prior to this, he would make what seemed to be a weekly trip to the bank to ‘haggle’ with the branch manager over a renewal rate. Once driving was no longer an option for him, I could not make all these separate time consuming visits with him and convinced him to put them on auto renew. Across all banks, it’s mid 6 fig combined.

Flash forward to now and current rates, I can’t hardly justify not going other than it’s doubtful the bank will work with me (with POA). Remember it’s several banks and I’m about 3 hrs away.

Does anyone know if auto-renewal rates are competitive or must they be managed individually and in person. Is there a better process? Moving them or consolidating is not likely. Sorry to seem so uninformed, but probably like most of you, I very rarely use a bricks&mortar bank. Thanks.

[02nz]

I would recommend comparing that bank's rates with Ally, Marcus, etc. You'll probably find they offer better rates, and it'll be far easier to manage online.

Surely it varies by bank, but my impression is that brick and mortar banks generally offer the worst CD rates. Online banks like Ally offer much better rates - and even better rates on brokered CDs (but you need to understand their downsides). In many cases, banks offer an attractive rate precisely hoping that lots of people will auto-renew into less competitive rates.

[cheese_breath]

Check your POA for any gotchas before you do this. My POA for DW allowed me to open and close accounts for her, but not to designate beneficiaries. That would mean any accounts I opened would have gone to her estate upon death and required probate.

[tunafish]

In my area credit unions have almost always offered better CD rates than banks. A couple of weeks before a CD matures I check rates on their websites to decide if I want to keep the CD where it is (perhaps at a different rate and term) or do a trustee to trustee transfer to another cu. Sometimes they will haggle and match a rate.

I have always been able to arrange this by phone or email with paperwork to sign sent to me.

If I had to deal with numerous CDs like the OP i would combine some of them.

[meebers]

I just opened a CD, 15 months and Credit Union said it will be auto renewed for 12 months. Of course I have the option of changing that but auto renewing for 12 months could be a smart or perhaps not so smart thing. Other Credit unions will move the $$ to savings unless I tell them other wise.

[nisiprius]

Unfortunately, auto renewals are not great. The pattern in our area is that the good deals are on CDs with weird terms, like 17 months, and lousy deals on the "normal" periods like 1, 2, 3 years. I believe the scam is that when the CD matures, there isn't any 17-month CD to replace it, so they are allowed to automatically replace it with a CD with a different term and a lousy rate.

In other words, you can't just auto renew without checking and thinking about it and doing something if the auto renewal isn't going to be a square deal.

No good answer on this one.

[Kruser64]

You might consider using a brokerage? You can go wild buying CDs from different institutions/terms/rates and can manage all of them from one interface. I know you said moving/consolidating is "not likely" but still...

[sport]

Unfortunately, auto renewals are not great. The pattern in our area is that the good deals are on CDs with weird terms, like 17 months, and lousy deals on the "normal" periods like 1, 2, 3 years. I believe the scam is that when the CD matures, there isn't any 17-month CD to replace it, so they are allowed to automatically replace it with a CD with a different term and a lousy rate.

In other words, you can't just auto renew without checking and thinking about it and doing something if the auto renewal isn't going to be a square deal.

No good answer on this one.

I see this in my area as well. Not only are the auto renewal rates very low, but one has a "grace period" of about 7 days in which to take action to avoid the undesirable renewal rate. Once it renews, there is an early withdrawal penalty if you want to change it. For this reason, I am moving all my CDs to brokered CDs. When a brokered CD matures, the money is put into your settlement fund.

[UpperNwGuy]

I never auto renew CDs.

[Astronaut4]

Unfortunately but rightly so, these CDs are not mine to move. I provide just the legwork to keep it running per the very elderly owner’s wishes. No new fangaled approaches. The existing banking relationships go back 30-40 years - just not with the same folks

I was told by one banks manager that he could work up all docs to re—up at new rates at renewal time and I could sign (with POA) from a location closer to me. That helps and I will try to work out something similar with the other banks involved.

I would feel derelict of duty by not trying to improve yield on his CDs especially in the current timeframe. Thanks all.

[123]

Since the relative has apparently limited your options to dealing with a few banks and establishing new accounts at either Treasury Direct or with a brokerage are likely not going to happen soon there may be one more alternative. That option would be to buy treasuries, at auction, through the bank itself (this was not unusual before the development of Treasury Direct). The yield on some treasuries at auction may exceed the CD rates available at the bank, even accounting for any fee charged. Of course there is likely a fee for every purchase (so bulk them up to the extent its reasonable) and there likely is no auto-rollover on the bank side. It may be worth discussing with your contacts at the banks, it could encourage them to offer a higher rate on a CD since otherwise the bank could lose the deposit to treasury securities.

In the typical case the bank charges a checking account for the purchase and performs the custodial duties of holding the security on behalf of the customer until maturity when the funds are returned to the checking account.