Saturday, March 9, 2013

I Bought a Barclays 5-Year CD

I just opened an account at Barclays online bank, and bought a 5-year CD, which currently is one of the best CDs available nationally. It earns 1.85% APY with an early withdrawal penalty (EWP) of 90 days of interest. This makes it a better deal than Ally Bank's 5-year CD which currently earns about 1.6% APY with an EWP of 60 days of interest, or PenFed's 5-year CD earning 1.65% APY or their 7-year CD earning 1.75%, both with an EWP of 365 days of interest.


Barclays online bank also offers a good savings account, currently earning 1.00% APY (compared to 0.90% at Ally Bank). However, Barclays online bank does not offer checking accounts, so you are limited to six withdrawals per month per federal regulations.

Also, Barclays does not offer IRA accounts, so their CDs or savings accounts are only of interest for those who are investing funds in taxable accounts (individual, joint, or trust accounts).

With the low EWP of 90 days of interest, you will earn more than 1% APY if you hold the Barclays 5-year CD for at least seven months. If you do an early withdrawal after a year, you will earn about 1.4% after paying the penalty. So for money you are unlikely to need for at least seven months, the 5-year CD is a better deal than the savings account.

The process to open the new Barclays account and buy the CD was very easy, and I was able to complete it entirely online in about 15 minutes. As is typical, part of the process is to provide routing and account numbers for the account that will be used to fund the initial deposit, which in my case was my Ally checking account. To verify the Ally account, two trial deposits were made within two business days, and the money to fund the CD was transferred from Ally to Barclays on the same day.

In addition to the very easy process to open the account and buy the CD, here are some other things I like about Barclays and their 5-year CD.

The CD rate is locked in when you open the CD online, so if the rate falls before the CD is funded, you don't get the lower rate. This is unlike some banks and credit unions which don't lock the rate until the CD is funded.

The Barclays CD terms and conditions explicitly state that you can do a full or partial withdrawal from the CD (and of course pay the EWP). Often the terms and conditions at other banks and credit unions are vague on this, or even state that they reserve the right to refuse an early withdrawal.

You can designate up to four beneficiaries when you open a CD or savings account, making it a Payable on Death (POD) account, thus excluding it from the probate process without requiring a living trust, and increasing your FDIC coverage to $250K per beneficiary. You don't have to enter birth dates or social security numbers for the beneficiaries, so it's quick and easy to designate them when opening the account.

The terms and conditions are displayed online during the process of opening the account. At some institutions you have to search through their website to find the Ts&Cs. I quickly scanned the Ts&Cs to examine the early withdrawal terms.

As at Ally Bank, there are no maintenance fees or minimum balance requirements.

I like the website design. It is clean and simple; the pages load fast, and I find it easy to navigate the site.

So, if you are looking for a good place to get a decent, safe yield in a taxable account, a Barclays 5-year CD is a great option in the current low-interest-rate environment. For money you are likely to spend in less than seven months, a Barclays savings account is a good option.

3 comments:

Anonymous said...

I filled out the on-line application for a joint account 5 year cd. The T&C agreement inside the application stated 90 day interest penalty on early withdrawls on cd terms of under 24 months and 180 day interest penalty on cd terms of 24 months or greater. Their website states 90 day interest penalty on all cd terms. So I don't know which one is correct.

When I finished the application, it said to log back in and I was unable to do so. Website said my password was incorrect. Set password up with Keepass so I know it is correct. When I clicked on "forgot password", instead of receiving an email showing how to reset your password, a window popped up instructing me to call them.

No customer service available on weekends. I will have to wait until Monday to call to get my account unlocked.

So far, not impressed with Barclay's Bank website. Ally Bank and Penfed Credit Union website much more user friendly.

I have not funded the cd yet, so not sure if I will go through with the cd purchase. Will see what their customer service rep says next Monday.

Kevin said...

Good catch on the EWP discrepancy between the Terms and Conditions and the FAQ. I have submitted a question to Barclays about this, and will post back here with the answer. Also started a thread about it on www.depositaccounts.com.

As you point out, Barclays customer service is inferior to Ally, certainly in terms of availability. But since the account opening process went so smoothly for me, I have had no need to contact customer service yet.

What I like about Barclays website compared to Ally is how fast it is. Ally website is cluttered with lots of stuff, so pages take longer to load. Of course if you run into problems like you did, this doesn't matter.

I will continue to use Ally as my hub account for a variety of reasons, so I don't expect to use the Barclays website much. Maybe to open more CDs.

I did start and save an application for a savings account, but didn't complete it. Will be interesting to see if I have any problems if I decide to finish the application.

Would be interested to hear back on what you find out on Monday.

Thanks,

Kevin

Anonymous said...

Just got off the phone with a Barclays Bank customer rep. She reset my password and stayed on the line with me until I was satisfied that I was able to gain access to my account.

I asked her about the change in EWP and she said they recently received a memo which stated that the EWP had changed. She said the 24, 36, 48, and 60 month cds now have a 180 day simple interest early withdrawal penalty. I forgot to ask her if older cds would be grandfathered under the previous terms and conditions.