bank rates

What Next After Promotional CD Matures?

Many banks will convert you to standard, lower CD ratesI take advantage of CD promotions whenever and wherever I can — provided, of course, they offer attractive interest rates.

But when the CD matures, I risk getting a renewal rate that’s beyond terrible.

That’s because most promotional CDs provide that, at maturity, they renew into a standard CD of the same maturity, with the standard posted CD rate — not a promotional rate.

Sometimes, however, an institution offers me an incentive to stick around — even if it means paying a bit more than a new depositor would get.

For example, in 2008-09, I opened 12-month CDs at Union Bank having a promotional 3.15% APY.

At maturity, the bank permitted me to “negotiate” for new 12-month CDs with rates one-half to three-quarters of a percentage point above its regular 12-month rate.

(Unfortunately, when those new CDs matured, the bank was no longer interested in negotiating, so I ended up closing them.)

I had a disappointing experience last year when all my promotional 24-month CDs at First Republic Bank matured.

The bank, laser-focused on downsizing its deposit base and lowering its interest costs, offered me nothing but the standard, exceptionally low posted rates.

I still appreciate First Republic’s customer service, though, and give local branch personnel credit for directing existing depositors to other area banks offering far better CD rates.

More recently, I’ve been worried about two jumbo, 24-month, 2.25% APY promotional CDs I have maturing next month at Rabobank.

Were they to renew for another 24 months at the current standard rate (what they provide for), their APY would be a measly 0.47%.

When I inquired at my branch, however, I learned that any CD holder wishing to stay at the bank would be offered a 59-month extension at the current 2.25% APY.

A customer walking into the bank for the first time with the same amount of money would be offered 0.71% for opening a five-year CD.

What this shows me is that Rabobank is interested in developing long-term relationships with all customers, including depositors — and that it’s not just looking at its near-term financial results.

Great customer service (which I get at both First Republic and Rabobank) might be enough to keep some customers at a bank, but I need attractive CD rates most of all!

Now, if only Maine-based Androscoggin Bank, at which I have several promotional CDs maturing this spring, would follow Rabobank’s example!

I’ll find out soon enough.

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Comments (4)
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4 Existing Comments
  1. Joe George said:
    on February 16th at 09:24 am

    Charles, you sound a lot like me. I’ve had to close a lot of cds in the past 2 years. Even 20 bps means a lot when the interest on your whole portfolio is shrinking to almost next to nothing. Thinking about getting into corporate bonds BUT at some point rates will rise and the value of those bonds will shrink. I do have a cash balance pension that I ain’t touching for a long time as it is earning 4.5% guaranteed. Wow, I wish everything earned 4.5% and to think that was a measly rate just a few years ago…..

  2. Joe George said:
    on February 16th at 09:30 am

    BTW: I am going much longer than normal on cds. The Ally bank 4 year cd, with the opportunity to adjust 2X is a great deal even though the rate isn’t great. I believe its about 1.50% now. Ally has the most favorable early withdrawl penalty in the industry. I do want to put some thought to the enhanced FDIC coverage. At some point, I believe it is 2013, the $250K will revert back to $100K insured unless Congress acts to extend it (how likely is that???). Therefore, if you are going over $100k at any institution, I would recommend that you keep as much as possible in that excess in money markets OR cd’s that will mature in 2013.

  3. Charles Rechlin said:
    on February 16th at 10:05 am

    Joe, thanks for your thoughtful comments about the post.
    First, I have good news: the increase in the FDIC insurance limit to $250k was made permanent in the Dodd-Frank legislation. (I think it was buried somewhere around page 572!). Many banks haven’t updated their websites or forms to reflect this.
    What still goes away in 2013 is the unlimited FDIC insurance for non-interest-bearing transaction accounts. After this year, they won’t be separately insured, so you’ll have to add them into your other accounts for insurance limit purposes.
    Second, I’m a big fan of the Ally 4-year RYR CD–if I get the .25% loyalty bonus Ally offers for keeping CD money at the bank when you have a maturity. I have a 2-year RYR CD maturing at Ally on Saturday and will convert it into the 4-year RYR CD–maybe even add a little money–if the 4-year rate stays at or near where it is today.
    Third, to avoid the trauma of bonds shrinking in value, I try to stick to those with a “survivor’s option.” At least then I can tell myself it really isn’t losing value–even though it really is.

  4. Joe George said:
    on February 17th at 07:31 am

    Charles, I have a 2-yr ally CD coming due on Monday and I’m doing exactly the same thing (adding+extending to 4 yrs +.25% loyalty add-on). Thanks for the info on the Dodd-Frank bill. But beware, the Republicans, if they take control, are vowing to repeal Dodd-Frank. Perhaps they will re-enact Glass-Steagall…yeah, right.