I’m happy to see more banks are raising their CD rates. The latest one is the internet bank Barclays which increased its 5-year and 4-year CD rates yesterday. Like past rate hikes from other banks, only the long-term CD rates increased. Barclays’ 5-year CD rate had a sizable increase. The APY went up from 1.65% to 1.90%. The 4-year CD APY went up from 1.45% to 1.55%. All the shorter-term CD rates and the savings account rate held steady. These rates are accurate as of 8/29/2013. Thanks to DA member cumulus for mentioning this news in the forum.
Barclays’ long-term CDs used to be great deals due to a small early withdrawal penalty (EWP). That changed in March when the EWP went up from 90 days of interest to 180 days for terms over 24 months. However, the 180-day EWP for long-term CDs is still reasonable. Also, it should be noted that this new EWP was NOT retroactive. It did not affect existing CDs.
Not all CD changes have been negative. One is a policy change regarding interest disbursement. When Barclays first started offering online CDs, it did not allow interest disbursement. Now you can receive an interest disbursement from your CD on a monthly basis. You have the option to keep interest in your CD account or transfer it to another account (either the Barclays savings account or a verified external account).
When I opened a Barclays CD, the application process was simple and smooth. One of the nice features of the application is the ability to designate beneficiaries which will make an account a Payable on Death (POD) account. No social security number was required for the beneficiaries. Another nice feature of the application process was the funding. I chose an ACH transfer to fund the CD, and it went smoothly. They use a trial deposit system to verify the external account. Two small deposits will be made to the external account. No withdrawals are done. External account can be a checking or savings account. You also have the option to mail in a check to fund the CD.
Barclays Online Savings Account
Barclays also has a good deal on its online savings account. It has a competitive rate of 0.90%. Since the savings account was launched in March 2012, there has been only one rate cut. That happened on May 16, 2013 when the yield went down from 1.00% to 0.90%. The online savings account has several nice features such as no minimum balance requirement and no monthly fees. Barclays also has a nice ACH transfer system. I have more details on its ACH system in this blog post.
The Barclays internet bank is part of Barclays Bank Delaware which is a FDIC member (FDIC Certificate # 57203). The bank is best known in the U.S. for partnering with companies in offering co-branded credit cards. It's part of the U.S. division of Barclays, a British multinational megabank.
Barclays Bank Delaware has an overall health score at EpBooks.us of 5 stars (out of 5) with a Texas ratio of 5.30% (excellent) based on March 2013 data. Please refer to our financial overview of Barclays Bank Delaware for more details. The bank has been a FDIC member since 2001.
How the Barclays 5-Year CD Rate Compares
This rate hike wasn’t enough for Barclays to take the top spot for nationally available 5-year CDs. Two internet banks still offer 2% yields. The best deal is at iGObanking.com which offers a 2.05% APY 5-year CD. Salem Five Direct offers a 2.00% APY 5-year CD. It’s also important to take the early withdrawal penalty into consideration. That hurts Salem Five Direct. To compare these CDs rates and early withdrawal penalties, I plugged in the numbers into our CD Early Withdrawal Penalty Calculator. You can see the comparison of all 6 CDs by viewing this CD calculator page. In addition to iGObanking and Salem, I also included the 5-year CDs from Ally Bank (with and without its renewal bonus) and CIT Bank.
To search for the best nationwide CD rates and the best CD rates in your state, please refer to the CD rates section of EpBooks.us.