Banking

Bank Of America CD Rates: Does it Worth Your Investment?

EPF Last Update: May 21, 2020

As one of the most popular banking institutions in the United States, Bank of America offers certificates of deposit (CD) that can help you save for retirement or generate some cash for your next vacation.

But, relative to the competition, how do its CD rates stack up?

Well, like many other brick-and-mortar institutions, Bank of America offers CDs with various maturities and APYs that vary depending on your account balance. But upon closer look, we found Bank of America’s CD rates not only lag all of its online banking counterparts, but they also lag many of its traditional banking counterparts as well.

Bank Of America CD Accounts:

The amount of money in your account and your desired holding period, there are two Bank of America CD accounts you can choose from:

  • Featured CD Accounts

These are available to savers with a minimum $10,000 balance and offer higher interest rates than standard CD accounts. However, applications must be made over the phone or in-person at your local branch.

  • Standard CD Accounts

These are available to savers within a minimum $1,000 balance and come with APYs that range from 0.03% to 1.00%. Holding periods also range from 28 days to 10-years.

Check out how Bank of America Standard CD rates look in New York State. These rates apply to account balances of less than $10,000:

Holding Period:CD Rate:
3 Month0.03%
6 Month0.03%
1 Year0.05%
2 Year0.10%
3 Year0.55%
4 Year0.65%
5 Year1.00%

While holding periods for Bank of America CDs can extend up to 10-years, we recommend you avoid any term beyond five years. Because rates are capped at 1.00%, extending your maturity date beyond five years results in the same APY.

Does Bank Of America Charge Any Fees for Their CDs?

Bank of America does not charge any fees to purchase a CD, maintain an account or to transfer the balance to another institution. However, for CDs held in IRA accounts, a $50 charge will apply to transfer out your balance. As well, a $125 fee will apply if the bank is legally required to freeze or withholds your funds. While this will only happen with legal wrongdoing on your part, it’s still something to keep in mind.

Most important though, pay attention to early withdrawal fees.

At Bank of America, if you withdraw money from your CD before the maturity date, you’re charged a fee that aligns with your holding period:

  • CDs with maturities of less than 90 days

You pay back interest earned on the amount you withdraw or pay seven days’ worth of interest on the total balance – whichever is greater.

  • CDs with maturities of 90 days to 1 year

You pay back 90 days interest on the amount you withdraw.

  • CDs with maturities of 1 year to 5 years

You pay back 180 days interest on the amount you withdraw.

  • CDs with maturities of 5 years or more

You pay back 365 days interest on the amount you withdraw.

As you can see, early withdrawal penalties are quite substantial. Because of this, we recommend you match your CD maturity date with your time horizon to avoid any investment losses.

Does Bank Of America Automatically Renew My CD?

Yes.

After the maturity date is reached, Bank of America automatically reinvests your funds into an identical CD with the same terms. However, if you want to opt out, you have a seven day grace period after it’s renewed to withdraw your funds and not incur any early withdrawal fees.

How Do Bank Of America’s CD Rates Compare to Their Competitors?

If you have a look at the chart below, you can see Bank of America’s average CD rates are near the bottom relative to its competitors. The average rates we calculated apply to account balances of less than $10,000 and all banks are FDIC insured.

What’s most interesting though, none of the offerings – except Capital One and SunTrust – allow your money to keep pace with inflation. See, as time goes by, the price of goods and services rise across the country. This causes your money to become less and less valuable. Assuming 2% inflation, next year, $102 will buy you the same amount of goods that $100 buys you today. So, if you’re not earning at least 2% on your money, your purchasing power is actually decreasing.

Traditional Bank:Average CD Rate:
Capital One2.86%
SunTrust2.05%
Chase Bank1.02%
HSBC1.00%
Huntington National0.75%
Wells Fargo0.65%
PNC Bank0.41%
Bank of America0.21%
TD Bank0.15%
Citibank0.05%
US Bank0.045%

Now compare the results with online banks:

Online Bank:Average CD Rate:
Citizens Access2.87%
Marcus By Goldman Sachs2.36%
Synchrony High Yield Savings2.27%
Discover Bank2.26%
American Express Bank2.13%
Barclays Online Savings2.07%
Ally Online Savings1.99%

Without a doubt, online banks are a much better alternative. With average CD rates ranging from 1.99% to 2.87%, nearly all of the offerings allow your money to keep pace with inflation. And like we mentioned above, average rates apply to account balances of less than $10,000 and all online banks are FDIC insured.

Now what About The Minimum Balance?

Well, unlike Bank of America, which requires a $1,000 minimum for its Standard CD Accounts, Marcus By Goldman Sachs only requires a $500 minimum. This figure is also less than Discover Bank ($2,500), Citizens Access ($5,000) and Synchrony High Yield Savings ($2,000). Moreover, while Barclays Online Savings, American Express Bank and Ally Online Savings only require a $1 minimum, their average CD rates are 0.29%, 0.23% and 0.37% less than Marcus By Goldman Sachs.

And while Synchrony High Yield Savings has the best CD rates if you can meet the $5,000 minimum, you really can’t go wrong with any of the online options above.

Conclusion

If you hold other accounts at Bank of America, it can seem like a convenient option to add a CD account to the mix. However, if you’re willing to shop around, you’ll find that many other institutions – especially online banks – offer CD rates that provide much more bang for your buck. And like Bank of America, all of the institutions above are FDIC insured, so you know your money is safe and protected.

Recommended Articles

Debt

Disadvantages of Credit Unions That You Didn’t Know

EPF March 26, 2020

Credit unions have numerous advantages against banks and online lenders. Be sure of that. Whether you are looking for a loan or other type of service like investment products, most of the credit unions beat banks and online lenders. Their...

Debt

What Your Have to Know About CDs Automatic Renewal Policy and Why You Should Be Careful

EPF December 21, 2019

How much do you know about the CD’s automatic renewal policy? Are you aware that it could cost you a big chunk of money? You need to properly understand your certificate of deposit (CD’s) date of maturity so that you...

AS SEEN ON