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Bank of America has a new online-only certificate of deposit that they're calling "Risk Free."
The 11-month, 4.75% APY CD comes with "the flexibility similar to a savings account," BofA says. But what exactly does that mean?
"With your Risk Free CD, we waive the early withdrawal penalty after the first six days of the account term (or the first six days following any partial withdrawals) when you reinvest the amount withdrawn in any Bank of America deposit account. We reserve the right to require at least seven days prior written notice of your intended withdrawal. Risk Free CDs have an eleven-month term. Alternative terms are not allowed."
So basically, if you need to withdraw your funds from the CD, you must deposit it into another BofA account and leave it in there for at least 6 days.
That doesn't seem totally risk free, does it?
Chances are, if you are going to be taking funds out of a CD, you need the money sooner rather than later. Tack on the week ahead of time you need to inform BofA about your intended withdrawal, and that's two weeks that it takes to get your money.
With online savings accounts still outperforming the offered 4.75% APY and no minimums (BofA requires $5,000) necessary, it doesn't make any sense to lock up your money for 11 months.
But if CDs really are your thing (they're not mine), at least go with someone like E-Loan, who offers a much higher return — 5.35% — and only a 3-month commitment.
I think you're misunderstanding the fine print. According to the manager I was talking to before opening mine, the 6-day limit is between deposits and withdrawals to the CD account. In other words, open CD (deposit), wait 6 days, then you can withdraw. After withdrawing, wait 6 days, then you can withdraw again. That's what I understood when I read the fine print also. Of course, the 7-day notice might still be required, but the 6 days after the withdraw before using the money is not.
I see this as a useful tool. For instance, I'm looking at buying a house soon. I don't want to tie up the money I'll be needing for the closing costs and such for long periods of time, but I also won't need it immediately. So this is a very good compromise, because otherwise it's a lot of money sitting around doing nothing.
Also, people with enough free credit can float any large expenditures on cards while waiting for the money to be free. And if they have a rewards card, they can also be getting cash-back for it in addition to the CD interest.