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Why Is It So Hard To Get My Interest?

As a retiree, living largely on investment income, I try to arrange a regular flow of CD interest payments.

When opening a CD at a new institution, I always:

  • Read the Truth in Savings Act disclosures to verify that interest can be withdrawn, without penalty, once posted (sometimes, though rarely, it can’t be), and …
  • Indicate on my application, or by email or call to a customer service representative, that I want my interest disbursed electronically to an external checking account, transferred to a checking or savings account at the CD institution, or paid by check.

Unfortunately, my diligence notwithstanding, the first interest payment often winds up being capitalized, or added to the principal of my CD.

This recently happened at CSBDirect.

The TISA disclosures said CD interest could be withdrawn with bank consent, so I did everything conceivable to ensure I had it.

I requested payment to my primary checking account by completing a section of the application specifically asking whether I wanted interest capitalized or paid out.

I then spoke to a customer service rep to confirm that interest would be paid as I directed and documented that conversation by exchanging emails with the same rep.

Despite these precautions, and despite having received from CSBDirect a CD receipt stating that interest would be paid into my checking account, the first interest payment was capitalized!

(The same customer service rep was extremely helpful in righting this wrong – after the fact.)

This was not one-off.

I’ve encountered the same problem at other institutions when I’ve opened my first accounts, most recently after joining NASA Federal Credit Union and Andrews FCU.

Sometimes I catch the problem before the first interest payment, as when I received a USAlliance CD receipt with a “dividends capitalized” box checked after I’d previously arranged otherwise.

Even institutions I’ve had accounts with for years ignore my instructions. Rabobank and BBVA Compass both bollixed up changes I tried to make in how I received interest.

The most consistent offender is Firstmark Credit Union. Every time I open a CD there, a friendly employee assures me that posted interest will be paid into my Firstmark savings account.

But, somehow, Firstmark always manages to capitalize the first payment.

The good news is that things are eventually straightened out. However, it’s frustrating.

Occasional glitches are to be expected. But why this same, recurring glitch?

Perhaps some institutions have a built-in disconnect between their application software and customer service reps, on the one hand, and their back offices, on the other.

Or maybe they just can’t stand to part with my money.

Whatever the reason, I wish they’d start listening to me instead.

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