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

ElitePersonalFinance
Last Update: January 15, 2021 Banking

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 0.05%. 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 Month 0.03%
6 Month 0.03%
1 Year 0.05%
2 Year 0.10%
3 Year 0.55%
4 Year 0.05%
5 Year 0.05%

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 0.05%, extending your maturity date beyond five years results in the same APY.

Does Bank Of America Charges Any Fees for Their CDs?

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

Most important, 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 of 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 grace period of 7 days. After it’s renewed to withdraw your funds won’t incur any early withdrawal fees.

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

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

What’s most interesting is that 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 rises across the country. This causes your money to become less and less valuable. Assuming 2% inflation, $102 will buy you the same amount of goods that $100 buys you today next year. So, if you’re not earning at least 2% on your money, your purchasing power is actually decreasing.

Bank: Average Savings Rate:
Bank of America 0.03%
Wells Fargo 0.01%
Citibank 0.08%
Chase 0.01%
HSBC 0.06%
US Bank 0.01%
SunTrust 0.01%
PNC Bank 0.01%
Huntington National 0.02%
TD Bank 0.03%
Capital One 0.40%

Now take a look at online banks:

Bank: Average Savings Rate:
Marcus By Goldman Sachs 0.50%
Barclays Online Savings 0.45%
HSBC Direct Savings 0.15%
American Express Bank 0.50%
Discover Bank 0.50%
Citizens Access 0.40%
Ally Online Savings 0.50%
Synchrony High Yield Savings 0.60%

Source

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.

What Is The Minimum Balance?

Bank of America requires a $1,000 minimum for its standard CD and $10,000 for the featured CD.

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.

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