dollars image

Recent Articles


ELoan CD Early Withdrawal Penalties are Too Onerous, Not Market

Rate information contained on this page may have changed. Please find latest cd rates.

As interest rates (and the stock market) appear to be headed down over the last few weeks, there has been renewed interest in longer term CDs as a place to hide out, preserve cash, gain yield. ELoan's rates are among the highest on BestCashCow.com's CD tables, but the onerous early withdrawal penalties mean they might not be the best place to put your money.

ELoan, which is now owned by Banco Popular, currently has some of the best online CD rates just about all maturities on the BestCashCow.com CD tables.  While the recent rise in ELoan's rates might be somewhat driven by Puerto Rico's credit problems, the CDs are issued by Banco Popular's NY branch and are fully FDIC insured (as long as you stay within FDIC limits).  However, if you look at the terms on ELoan’s website, you’ll see that the penalties for early termination are extraordinarily onerous.  ELoan charges 2 years of interest as a penalty for early termination of a 5 year CD, 1 year on the 3 and 4 year CDs, and 9 months on the 1 year CD.   If you were to put $200,000 in a 5 year CD with ELoan and then either need the money or see much higher rates, you would be paying almost $5,000 in penalties to become liquid.  Given the likelihood of dramatically higher interest rates, it would be foolhardy to tie your money up in a CD with such dramatic early termination penalties.

ELoan’s penalties are completely out of line with those of ELoan’s competitors.  Albeit with slightly lower rates, Sallie Mae’s 1 year CD has a 3 month early termination penalty.  Barclays Bank and Synchrony Bank offer online 5 year CDs carrying only a 6 month penalty (learn more about strategies involving these rates here).    CIT Bank offers a 5 year CD with a 1 year early termination fee, and has very 1, 2, 3 and 4 year Ramp Up CDs that allow you to get a higher rate if interest rates rise (CIT’s Ramp Up CDs were named a BestCashCow.com Best Bet for 2015).  

Given the likelihood of dramatically higher interest rates in the intermediate term - if not the near term -  we feel that depositors would be much better served to look at these products and to avoid ELoan onerous early termination fees.

See and compare all of the best CD rates, online and available locally, here.

See all of the best CD rates here.  


Banco do Brasil Americas Rolls Out Great Rates on Money Market Account and CDs

Rate information contained on this page may have changed. Please find latest cd rates.

No, it's not Carnival, but Banco do Brasil Americas has broken out savings and CD rates that are amongst the best in the country for balances of $100,000 or over. If you don't want to deposit that much in the bank, their rates for balances between $10,000 and $99,999 aren't bad either. The chart below shows their rate offerings:

No, it's not Carnival, but Banco do Brasil Americas has broken out savings and CD rates that are amongst the best in the country for balances of $100,000 or over. If you don't want to deposit that much in the bank, their rates for balances between $10,000 and $99,999 aren't bad either. The chart below shows their rate offerings:

Product

APY $10,000 - 99,999

APY $100,000

Money Market Account

1.00%

1.20%

1 Year CD

1.25%

1.35%

2 Year CD

1.40%

1.60%

3 Year CD

1.50%

1.70%

4 Year CD

1.60%

1.80%

5 Year CD

2.25%

2.50%

 

Banco do Brasil has six locations in southeastern Florida.

The bank is financially sound with a Texas ratio well below the national average (a low Texas ratio is good).

For those that live in southeastern Florida, these rates are worth checking out.

If you don't live in this bank's deposit area, find the top rates in your location


Amex Offering A 5-Year CD Through TD Ameritrade at 2.40%

Rate information contained on this page may have changed. Please find latest cd rates.

This issue's yield looks attractive, but it should be avoided.

TD Ameritrade is contacting all of their clients today to try and syndicate a 5 year CD paying 2.40%.   This CD is covered under FDIC insurance rules to the $250,000 limit and because it is issued by Amex Centurion Bank, it is covered under a different FDIC certificate than savings accounts you may have at American Express Bank FSB.  It also may offer a yield slightly higher than the best 5-year rates otherwise available.  Nevertheless, these types of brokered issues should be avoided.

Longer-term CDs, such as a 5-year CD, can be attractive, even in a low rate environment, but only when they offer a reasonable termination clause.  As this article explains, a 5-year CD with a 6 month early termination fee can effectively represent a way to get a decent one-year yield with an option to continue to hold the CD if interest rates do not rise in the outer years.

Brokered CDs, like this Amex issue through TD Ameritrade, do not offer this option.  If interest rates rise, you are either stuck earning a below market interest rate or forced to sell the CD at a loss through TD Ameritrade. 

Longer-term interest rates may rise dramatically at some point over the next 5 years.  In fact, a dramatic spike may occur in the next year when the Federal Reserve begins to raise interest rates later this year.   Even if you commit to trying to get out of this issue at the earliest signs of a interest rate move, you are going to take a huge loss selling through TD Ameritrade into an illiquid market (in fact, you would take a huge loss were you to try to sell this issue the day after purchasing it since the market is entirely illiquid).   In an online 5-year CD with a 6 month early termination penalty - such as those offered by Synchrony Bank and Barclays Bank - you always have the option of holding the CD for 6 months and using the six months' interest to cover the penalty.   

It should also be noted that most online brokers waive the early termination penalty upon the death of the holder, allowing the heirs / beneficiaries or executor to redeem the CD at par value.  TD Ameritrade usually also forces brokered CDs to be sold into the market at a loss upon death, although with this offering they claim to offer a survivor’s option (when I called TD Ameritrade about this issue, their fixed income department was unable to fully explain or document the details of this option).

Compare the best 5 year CD rates.