Sovereign Bank and the 3% CD
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Sovereign Bank and the 3% CD

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While there is a great stress on all citizens to save, we are often presented with sub-par rates. Banks need deposit accounts to fund their loan and mortgage business, but are giving little in return. Yet, there is a push to get customers to come back (or in) the bank as well and curb the purely internet use. Sovereign Bank is one of thise banks and is currently offering a 3.00% APY 5 year CD.

Maybe it’s a sign of the times, possibly the reflection of the new reality. Banks are not offering high rates for deposit accounts. Money markets, savings accounts and certificates of deposits are riskless investments; however they are necessary vehicles for the economy. Without these deposit accounts banks have no reserves to give loans. No loans, no (or little) new business or growth of existing businesses. The old adage is true: “One needs money to make money.” Yet, bank rates are a paltry 0.01 – two point something per cent.

Through all of my searching, the highest CD rate I have found is through Sovereign Bank. A five year CD is being offered for 2.96% APR (3.00% APY). This may seem interesting, given that they are a brick and mortar bank. Other 5 year CDs from internet (and internet dominated) banks have a much lower APY [Ally Bank 2.40% APY, Sallie Mae Bank 2.35% APY, Discover Bank 2.25% APY].

Oscar Wilde explains growing up by saying, “The young know everything, the middle-aged suspect everything and the old believe everything.” By this measure, I guess I have transitioned to being middle aged because I immediately questioned the motives of such a discrepancy. After speaking to a Sovereign Bank branch manager, I learned there is push to get savers like me, who are 98% internet based with no allegiance to a bank, back to coming into and using banks where one can physically walk into. Offering a high rate is certainly one way to make me walk through a threshold.

However, there is also another reason for the high rates aside from bringing people back…bringing in new people. Most readers probably have never heard of Sovereign Bank. It used to be traded on the NYSE under SOV, but in 2009 (January 30) Banco Santander (NYSE:STD) completed its purchase of Sovereign. With this new international backing, Sovereign, which was severely hurt by losses related to auto loans and stock in Fannie Mae and Freddie Mac, now is looking for growth. Branches currently exist in New Hampshire, Massachusetts, Rhode Island, Connecticut, New York (City and Long Island), New Jersey, Pennsylvania and Maryland. Notwithstanding, I’m sure they would be happy to take your money from any state.

Today's Highest Online CD Rates

Bank Product Term Interest Rate (APY)
Finworth, a division of InsBank 1-Year 5.38% APY with $50,000 minimum
CFG Bank 1-Year 5.36% APY with $500 minimum
TotalDirect, a division of City National Bank of Florida 1-Year 5.35% APY with $25,000 minimum
Dollar Savings Direct, a division of Emigrant Bank 3-Year 5.00% APY with $1,000 minimum
First Internet Bank of Indiana 3-Year 4.66% APY with $1,000 minimum
M.Y. Safra Bank 3-Year 4.65% APY with $500 minimum
First Internet Bank of Indiana 5-Year 4.55% APY with $1,000 minimum
BMO Alto, a division of Bank of Montreal Harris 5-Year 4.50% APY with no minimum
Colorado Federal Savings Bank 5-Year 4.35% APY with $5,000 minimum

See More Online CD Rates →


  • Rob

    February 20, 2011

    Good article. Thanks for the information.

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