bank rates

A 15% CD Rate Means Just One Thing

Attention signYou’re being scammed.

The Financial Industry Regulatory Authority, a watchdog over U.S. securities firms, has just put out a new investor alert with the straightforward title: High-Yield CDs: Red Flags That Signal a Scam.

The alert contains two real-world suspected scams, involving:

  • An email pitch that “appeared to come from a large U.S. bank” enticing the reader to buy a “CD offered by an international banking partner.” The yield: 15%.
  • Phone calls from someone posing as a “representative from a legitimate brokerage firm” offering CD rates well above the top market yields. “This offer appeared to be an attempt to gather personal financial information.”

Bankaholic readers know they can find the best legitimate certificate of deposit offers on our CD Rates Leaderboard and on our list of the highest CD rates from credit unions and local banks.

You’ll find nothing close to 15% APY on either of those lists, but 3% isn’t out of reach for some savers.

FINRA offers several red flags that could signal a scam is afoot. We’ll offer our own commentary on some of this advice, as well.

FINRA says a CD may be fraudulent if:

  • Interest rates are “significantly higher than average.” We’re not sure what FINRA thinks is higher than average. The average 5-year CD pays just 0.80% APY, while the top nationally available deal pays 2.3% APY. We’d call that significantly higher than average. If you find an offer greater than 3%, scrutinize it.
  • An email pitch comes from an email address not associated with the financial institution allegedly offering the deal. Mouse over email links in any solicitation to see the real address. If the domain (that’s the part of the address after the @ symbol) isn’t from a legitimate bank or credit union, don’t pursue this deal.
  • The pitch contains misspellings or poor grammar.
  • The promotion comes from a U.S. institution that says it’s working with an international bank.
  • The offer is for a “limited time only.” Many legitimate CD offers use this or similar language, so this isn’t a giveaway that the offer is fraudulent.
  • The offer is for “best customers” and requires high minimum investments. Again, there are many legitimate offers that are sent to existing customers and require a big financial commitment. This isn’t always a sign of fraud.

Your strongest defense against scam artists is to be a diligent investor. If you have any question that an offer – by Internet, phone or mail – is legitimate, independently find the customer service number for the institution the offer is alleged to have come from and give them a call.

You can also protect yourself by purchasing certificates from federally insured institutions. You can check with the FDIC or the NCUA to see if the bank or credit union is insured.

Don't miss out on the next bank deal. Get the newest deals delivered straight to your inbox!

Comments (0)
1 Star2 Stars3 Stars4 Stars5 Stars (3 votes, average: 5.00 out of 5)
No Existing Comments

Comments are closed.