How to Refinance a CD

How to Refinance a CD - claimed the disclosures allowed...

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CD refinanceIn the U.S. insured CDs are required by the Truth in Savings Regulation DD to state at the time of account opening the penalty for early withdrawal. It has been generally accepted that these penalties cannot be revised by the depository prior to maturity.[citation needed] However, there have been a couple of cases recently where a credit union modified their early withdrawal penalty and made it retroactive on existing accounts.[1] The second occurrence happened when Main Street Bank of Texas closed a group of CDs early with out full payment of interest. The bank
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Unformatted text preview: claimed the disclosures allowed them to do so.[2] The penalty for early withdrawal is the deterrent to allowing depositors to take advantage of subsequent enhanced investment opportunities during the term of the CD. In rising interest rate environments the penalty may be insufficient to discourage depositors from redeeming their deposit and reinvesting the proceeds after paying the applicable early withdrawal penalty. The added interest from the new higher yielding CD may more than offset the cost of the early withdrawal penalty....
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This note was uploaded on 02/29/2012 for the course ECON 4223 taught by Professor Johnp.willen during the Spring '12 term at UCLA.

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