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CD rates are low, fees are not

By Sheyna Steiner ·
Wednesday, June 1, 2011
Posted: 3 pm ET

A recent story on, the website for The Boston Globe, highlighted the fee-grabbing changes recently implemented by the three biggest retail banks in Massachusetts.

At Bank of America, Citizens Bank and Sovereign Bank, early-withdrawal fees have increased in the past few months. Bank of America and Citizens Bank now charge flat fees for cashing in a CD early, according to the story, "Getting out of a CD early will cost you."

From the story:

Bank of America, the state's largest bank, used to charge customers between three months' and one year's interest if they withdrew money early. But in February, the bank started charging a $25 fee, plus 1 percent of the withdrawn amount for CDs that mature in less than a year, and 3 percent for longer-term deposits.

Citizens Bank used to charge customers between 90 and 180 days of interest, depending on the length of the CD. But it now charges customers a flat $50 fee -- plus a penalty at least as large as the old one.

It just seems to add insult to injury to savers. Banks offer bottom-of-the-barrel rates chained to the threat of parsimonious early-withdrawal fees.

Of course, they have that right. And consumers have the right to not do business with them if they dislike the terms of the agreement. Many banks and credit unions offer far better terms when it comes to CDs.

When shopping for a CD, savers should try to get the highest possible CD rate but they also must be aware of the early-withdrawal penalty.

An onerous early-withdrawal penalty could keep your savings stuck in the low-yield dustbin while interest rates soar.

After all, the effort of comparison shopping for the highest CD rate will be negated if you end up forfeiting not only all the interest earned but some of the principal should you need to cash in early.

One option for CD shoppers is a liquid CD. But liquidity comes at a price; typically the yields will be lower but you can abandon ship, with some caveats, nearly at will.

Bankrate released a survey of liquid CDs in April. Though none will set the world on fire, the flexibility may be worth it. Read the survey here.

Have you run into any particularly high early withdrawal fees?

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