Can I get a higher interest rate CD without paying a penalty?

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miamivice
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Can I get a higher interest rate CD without paying a penalty?

Post by miamivice »

Our non-profit organization has a $100,000 CD that pays 1.51% interest that we obtained last summer. This was a much better rate than the money market rate of 0.35%. However, as interest rates have climbed, so have CD rates. This is a 2 year CD.

I'm wondering if a bank can increase the rate of our CD without charging me a penalty. Has anyone tried? What would I tell them?

I'm thinking the answer is no, but worth asking here to see if there is any guidance or how to phrase the request.
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Bennie
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Re: Can I get a higher interest rate CD without paying a penalty?

Post by Bennie »

I would ask the institution that issued the CD. I think the rules vary.

You probably do have to pay a penalty but some institutions limit this to lost interest. Again, I would ask the institution that issued the CD what you can do.

You could do the calculation yourself if the lost interest is offset by the higher interest you will earn when getting a CD with a better rate. You may lose what you gained in the first year but earn enough interest in the second year to cover the loss and some.
Longdog
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Re: Can I get a higher interest rate CD without paying a penalty?

Post by Longdog »

If you got it directly from the issuing bank or credit union, it probably has predefined early termination fees. Find out if that is the case, and how much they are, and then do a comparison of how much the cost to break the CD early would be, and the benefit from getting a new CD at a much higher rate.
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OnTrack2020
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Re: Can I get a higher interest rate CD without paying a penalty?

Post by OnTrack2020 »

Some banks, when you originally obtained the CD, offer a "step-up" or "bump-up" CD which allows you to obtain a higher rate of interest, typically once during the CD term. You will need to call them and ask if that was an option when you took out the CD or look at the original paperwork to see if there is anything in there.
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celia
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Re: Can I get a higher interest rate CD without paying a penalty?

Post by celia »

I think if they were willing to increase the rate during the two-year term, they would have advertised that at the time the CD was opened.

You can always ask the bank what the early withdrawal penalty is for that CD. Calculate the penalty in terms of dollars and ask the board what they think.

But, be forewarned, because even if you can get a better rate now, what will the organization do in another 6 months if the rates increase again?
meebers
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Re: Can I get a higher interest rate CD without paying a penalty?

Post by meebers »

I did it 3 times, twice paid penalty, once penalty waived. https://www.depositaccounts.com/tools/b ... lator.aspx :D
20cm
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Re: Can I get a higher interest rate CD without paying a penalty?

Post by 20cm »

How much is the early withdrawal penalty? It's common for bank CDs of greater than 1 year duration to have an early withdrawal penalty of 6 months of interest. If that's the case for your CD and you have 15 months left to maturity then any CD of 2.2% or higher for a term of 15 months or longer would make taking the penalty and buying the new CD a better deal.
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