Best overall Internet Bank?

[jazz4cash]

She had about 75K in the CD. I took out 30K to pay for her assisted living until the CD matures in September. The penalty was a flat $25 fee plus a percentage based on the amount withdrawn. I don't remember the exact penalty now but it was around $700 for the 30K withdrawn.

Mom use to earn really good interest on her CD's back in the 80's, but they're just not earning much anymore. She also may need that money at a moments notice with her current health conditions. The penalties far outweigh any interest she may have earned. It has taken a lot of time to convince her a Savings account with 1.5% interest is a better option than her CD with only .15% interest and penalties. I still don't know that she believes me.

I've never heard of an early withdrawal penalty anywhere near that severe. Just doesn't sound right. The penalty is usually limited to a portion of the interest earned even if it's 100% of the interest. That's tough when the client doesn't want to switch and the bank is happy to take advantage. Especially when some pressing need arises. Heartbreaking, really.

 

[mountainsoft]

I've never heard of an early withdrawal penalty anywhere near that severe. Just doesn't sound right. The penalty is usually limited to a portion of the interest earned even if it's 100% of the interest. That's tough when the client doesn't want to switch and the bank is happy to take advantage. Especially when some pressing need arises. Heartbreaking, really.

You're right. My memory isn't what it used to be, so I looked it up. US Bank charges "$25 + either 1/2 of the interest you would have earned if the funds were withdrawn after maturity OR 1% of the withdrawal amount, whichever is greater".

There was no significant interest, so 1% of 30K withdrawn + $25 worked out to around $325. Not as bad as I remembered it being, but still a big hit. Certainly more than the interest she earned from the 18 month CD.

In any case, the Discover Savings account will offer more flexibility and pay much better interest (1.5% vs .15%).

 

[jazz4cash]

You're right. My memory isn't what it used to be, so I looked it up. US Bank charges "$25 + either 1/2 of the interest you would have earned if the funds were withdrawn after maturity OR 1% of the withdrawal amount, whichever is greater".

There was no significant interest, so 1% of 30K withdrawn + $25 worked out to around $325. Not as bad as I remembered it being, but still a big hit. Certainly more than the interest she earned from the 18 month CD.

In any case, the Discover Savings account will offer more flexibility and pay much better interest (1.5% vs .15%).

Glad to hear, but still onerous. I checked and found sources citing the penalty could exceed the interest earned which I guess is why you can deduct the penalty to reduce AGI.

Edit: This topic has captured my attention but I don't want to derail this thread. I noticed some issuers can waive the penalty in the event of extraordinary circumstances (like death or disability). US Bank says
"*The penalty may be waived in the case of death or judicially declared legal incompetence of any owner of the certificate. The penalty
may also be waived on Individual Retirement Account certificates in the case of permanent disability of the owner or for normal or
required distribution of retirement funds at age 70 1/2 or beyond."

 

[mountainsoft]

you can deduct the penalty to reduce AGI.

Interesting, I didn't know that. Unfortunately, Mom is on a disability income and doesn't earn enough to pay taxes anyway. So any deduction is meaningless in her case.

 

[jazz4cash]

Interesting, I didn't know that. Unfortunately, Mom is on a disability income and doesn't earn enough to pay taxes anyway. So any deduction is meaningless in her case.

Might be helpful for you to look back to my post #53 that I edited.