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Bank of America makes tough financial times worse


In the past, BofA would charge 90 days worth of interest for early withdrawals from a CD good for 12 months or less. In other words, a $10,000, 12-month CD with an annual yield of 0.3% would entail an early withdrawal penalty of about $7 if you took out the entire amount.

Now BofA is charging a flat $25 plus 1% of the amount withdrawn for CDs with terms under 12 months and 3% for longer terms.

That means the early withdrawal penalty for that same $10,000, 12-month CD now runs $125 -- a nearly 1,700% increase. The penalty for a five-year, $10,000 CD is $325 -- a roughly 1,600% increase.

As Kevin Drum notes:

This is yet another example of a fee that (a) most people don't really know much about, (b) most people don't think they'll ever incur, and (c) generally gets paid by people in some kind of distress.

To be fair, the tradeoff of a CD is supposed to be that the bank is guaranteed the use of your money for a defined period of time in return for that higher interest rate. On the other hand, interest rates on CDs have been awful since the 2001 recession.

By fnord12 | May 7, 2011, 11:16 AM | Liberal Outrage