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Bank CDs: Online Vs. Brick-And-Mortar

A recent piece about choosing between bank and credit union CDs got me thinking about a similar issue I sometimes face:

If the yield offered by two competing institutions is similar, is there any reason to choose a CD of an online bank (such as Synchrony or CIT) over a CD of a traditional brick-and-mortar bank (such as First Republic or Rabobank)?

As with the bank/credit union CD question, the answer is “it depends.”

However, my general experience has been that online banks are better at establishing and administering CDs than brick-and-mortar banks.

I’m usually nervous sitting in a bank branch, across from a “personal banker,” opening a CD.

The principal reason is that my CD information is being entered into the bank’s computer system by the banker – not by me.

I’m basically surrendering control of the CD’s terms to someone else.

Moreover, that personal banker is often unsure about features I consider important, like PODs and interest disbursements, having spent most of his or her day doing things other than opening CDs.

And sometimes I’m at a legacy branch of an acquired institution, dealing with inexperienced employees who are working with an unfamiliar system.

With online banks, I can establish all or most of the CD’s terms by typing them myself into an online application system, without human interference.

Even where the online bank requires contact with a telephone rep to arrange certain details, I’m likely dealing with someone familiar with CDs.

Last year, I wrote about my problems with a local, legacy-type branch of BBVA Compass when I tried to change my CD interest payment option.

My most recent negative experience involved CDs at California-based Rabobank.

When I established the CDs at my local branch in 2012, I set them up as payable-on-death accounts and named my beneficiary.

I received printed CD receipts showing the correct beneficiary information, having signed electronic signature cards to the same effect.

When I recently tried to change the beneficiary, however, the bank discovered that my signature cards had vanished from its system and that the original banker had incorrectly assigned the accounts a code designating each “individual account without POD beneficiary.”

By now, I’ve developed a close and friendly working relationship with my local Rabobank bankers.

I like and respect them.

Unfortunately, though, this relationship has developed largely as result of fixing errors in CDs opened by previous employees.

There are exceptions, naturally. I never have problems at brick-and-mortar First Republic and always have them at online iGObanking.com.

But, as they say, the exception proves the rule.

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