Beware Bank CDs Automatic Roll-Overs

With lots of people, including me, feeling queasy about the stock market, conservative bank Certificates of Deposit are looking pretty good--or at least safe.

But banks have a sneaky way of bumping up their profits on CDs: when they mature, they roll them over into the lowest interest rate they offer. That is, unless you get in touch and demand the best rate.

A banking insider clued me in to this scam. You start off being smart, putting your money into the highest-interest CD you can find. Could be via the Internet, could be you walked into the bank. Great.

What you probably didn't realize was that to capture your money, the bank offered you their best possible rate.

But when the term is up, the bank hopes you'll forget about or just let it ride, assuming that because they had a good rate before, they'll give you a good rate now. That's when they get you.

Banks don't offer everyone the same interest rate for the same term. The've become like the airline industry, with prices changing constantly. Same thing with the banks. You don't know what interest a bank will pay, unless you ask and specifically for the highest rate possible.

I realized this recently when I checked on the maturity date of a 6-month CD I bought on line from HSBC. Fortunately, the banks are required to send you notice of maturity. But when I looked on the web site to see what the new interest rate would be, there was nothing--no information.

Turns out, that's standard operating procedure.

When I called customer service for HSBC, I learned that the best interest rate they would offer me on a new 6-month CD was 1.25%. That's almost 50% less than the top interest being offered by other banks! Wow! What's amazing is that when I bought the CD 6 months ago, HSBC had one of the highest rates available--4%. No longer.

You can find out who has the highest rates from listings that appear in most local newspapers, or via Bankrate.com.

So keep a careful schedule of when your CDs mature. Be prepared to demand the highest rate from the existing bank, and shop around to make sure they're offering you a good deal.