CD rate dispute teaches lesson

Don TaylorQuestionDear Dr. Don,
I was quoted 4 percent on a five-year CD for $200,000 from a bank. When I sent in the money, they changed the CD rate to 3 percent. I asked for a refund, as I was not willing to accept the lower rate.

The bank is charging me a $2,822 penalty for a total of three days invested. I found them online. It was a total scam as I was switched to different salespeople every time I called and was given a different answer each time. My wife and I are both seniors and disabled. We don't know what to do. I hope you can give me an answer.
-- Larry Livid

AnswerDear Larry,
With your permission, I discussed the account with a representative of the bank in question. The good news is the bank refunded the early withdrawal penalty you incurred when you closed the account after three days.

After reviewing the call tapes, the bank discovered the customer service representative didn't disclose that you'd have to request to close the account in writing within a set time period to avoid the early withdrawal penalty. The bank should have told you that a verbal request wasn't sufficient to close the account without penalty.

What about the change in the interest rate on the deposit? I spoke with a representative of the bank who told me a 4 percent annual percentage yield had not been offered since December 2008. It's not clear how you got the notion the bank was offering 4 percent when you went shopping for a CD in July 2010. However, the bank wasn't marketing a CD at that rate in July.

Your experience reinforces the idea that depositors need to know all the particulars about a CD investment -- including the interest rate, early withdrawal penalties and withdrawal requirements -- before funding the deposit.

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