Sallie Mae Bank Certificate of Deposit (36 Month CD)

Sallie Mae is best known for student loans, but Sallie Mae Bank also runs a deposits business with a high-yield savings account, a money market account, SmartyPig and eleven CD terms from 6 to 60 months. There are no monthly maintenance fees. Every CD requires $2,500 to open, and that $2,500 is also a minimum balance you must maintain to keep earning interest. The 36 month CD at 4.35% APY is the best value on the board. It is tied for the highest rate Sallie Mae posts, matched only by the 60 month term at the same 4.35%, so there is no reason to accept an extra two years of lock-up for identical yield. Below that the curve is tight: 18, 24 and 30 months all pay 4.25%, 15 months pays 4.20%, 12 months 4.15%, 13 months 4.10%, and 11 months 4.05%. Then there is a cliff at the short end that deserves attention. The 6 month and 9 month CDs both pay 3.20% APY, which is 55 basis points below Sallie Mae's own High-Yield Savings Account at 3.75% APY and below its Money Market Account at 3.50%. Buying a 6 or 9 month Sallie Mae CD means locking up $2,500 for months in exchange for less money than the bank's fully liquid account would pay you. Nobody should take that trade. Interest accrues daily and the compounded interest is credited monthly. The early withdrawal penalty is 90 days of simple interest on the amount withdrawn for maturities of 12 months or less, and 180 days for maturities longer than 12 months, so the 36 month CD carries the 180 day penalty. If the forfeited amount exceeds the interest earned, Sallie Mae takes the difference out of principal, and the penalty may be waived on the death or legal incompetence of an accountholder. At maturity you get a 10 day grace period, after which the CD renews automatically at its current rate and term. This makes sense for savers who can part with $2,500 for three years and want to lock a rate above 4% well into the future, and it is a solid ladder rung at the 18 to 36 month range. Skip the 6 and 9 month terms outright. Skip the whole product if $2,500 is a stretch, since Ally, Synchrony, Capital One and Barclays ask for nothing. And note that FDIC coverage is the standard $250,000 per depositor per ownership category, rising to as much as $500,000 on a qualifying joint account.