American Express is more known for its premium credit cards, but it also operates American Express National Bank.
It is an online bank that offers savings account and certificates of deposit (CDs) to its customers with low fees and strong interest rates.
If you're looking to open a CD to help you save for specific goals, you might come across their CDs as an option.
In this review, learn more about their CDs to see if their interest rates, fees, and features are suitable for your savings purposes:
Average Interest Rates
American Express Bank operates as on an online bank. It does not have any physical locations.
That allows it to save money that would otherwise be spent on running branches of the bank. American Express passes those savings on to you with its top-notch interest rates.
American Express passes those savings on to you with its top-notch interest rates.
A certificate of deposit offers a better interest rate than a savings account because they are less flexible.
You're not allowed to add or withdraw money from a CD during its term without paying a penalty.
You have to wait for the CD's term to expire. When that happens, the CD is said to have matured.
American Express offers only one type of CD, but the rate you will earn is based on the CD's term. You can get a CD with any of the following terms:
- 6 months
- 12 months
- 18 months
- 24 months
- 36 months
- 48 months
- 60 months
The longer the term of the CD, the higher the interest rate will be.
Early Withdrawal Penalties
Certificates of deposit offer better interest than savings accounts for a reason: banks can make more money on CDs than savings accounts.
That's because you are, in effect, lending money to your bank when you deposit it.
When you deposit money in your bank account, your bank pays you interest.
It then uses some of your money to make investments or offer loans to other customers.
It earns more interest from those loan and investments than it pays to you.
The difference between the interest the bank earns and the interest it is used to pay the bank's employees and keep the bank running.
If you deposit money in a savings account, you can ask the bank to return it to you at any time.
That means the bank needs to keep some amount of cash on hand.
Whatever cash the bank keeps on hand cannot be used to earn interest for the bank.
With a CD, you promise not to withdraw the money for a certain period of time.
That gives the bank the chance to make longer-term investments with your money.
Because you agreed not to ask for your money back until the CD matures, the bank doesn't need to keep as much of it on hand.
That lets it invest a larger percentage of your deposit and earn more money from it.
Don't touch to money to avoid penalties
To encourage you to keep your promise and not ask for your money back before the CD matures, banks charge early withdrawal penalties.
If you want to add money to a CD or withdraw from it during its term, you'll have to pay the penalty.
On top of paying the penalty, you'll have to withdraw the full balance of the CD. You can't take just some of the balance.
How large the early withdrawal fee is based on the CD's term. Long-term CDs come with a higher penalty. For CDs from American Express National Bank, these are the early withdrawal penalties:
American Express National Bank CD Early Withdrawal Penalties
|CD Term||Early Withdrawal Penalty|
|12 months or less||90 days of interest|
|More than 12 months||180 days of interest|
Early withdrawal fees are the only way to lose money on the CD.
If you have to withdraw money from your CD before the earned interest covers the full fee, your principal will be reduced to make up the difference.
Otherwise, there's no way to lose money on your CD because it is insured by the Federal Deposit Insurance Corporation.
The FDIC covers balances up to $250,000, so you'll be reimbursed, even if the bank that you opened a CD account with closes.
If you put your money in a CD at an FDIC-insured bank you can feel confident that you'll earn exactly the amount of interest that you expect to.
Minimum Deposit Requirement
Many banks require that you deposit a minimum amount to open a CD. This is to justify the expense of managing the CD for you.
American Express National Bank keeps things simple, allowing you to open a CD with any deposit.
There is no monthly fee for the account, so you also don't have to worry about maintaining a balance to waive maintenance fees.
These factors make their CDs a good choice for savers who are just starting out.
IRA CDs Not Available
Individual Retirement Accounts (IRAs) give savers a way to start planning for their retirement.
To sweeten the deal, they also let you deduct the amount you save from your income when you file your taxes.
That lets you save money for the future, and save money on your taxes now.
Many people want to combine the safe returns that CDs offer with the tax benefits of an IRA.
Unfortunately, American Express Bank does not offer the option to open a CD in an IRA.
Unfortunately, this online does not offer the option to open a CD in an IRA.
What Happens When the CD Matures
When the term of a CD ends, the CD is said to have matured. When a CD reaches maturity, you have the opportunity to make changes without paying a penalty.
You will be notified by paper mail or email 10 days before your CD reaches maturity.
When the CD reaches its maturity date, it will automatically renew for the same term at the current interest rate.
You will have a 10-day grace period from the maturity date to make changes. If you make any changes during this grace period, you will not be assessed an early withdrawal fee.
Another option is to inform the bank of what you'd like to do with the CD when it reaches maturity -- you can do so at any time after you open the CD.
Do it early so that you control what happens when the CD matures and before it renews automatically.
How Does It Compare?
American Express Bank isn't the only bank that offers CDs. If you're looking for the right CD for your needs, consider these competitors.
Synchrony Bank appeals to high-balance customers by offering multiple interest rate tiers on its CDs. The higher the balance you have in the CD, the more interest that you'll earn.
Synchrony Bank offers CDs with terms ranging from 3 months to 60 months.
The minimum deposit to open the account is $2,000. Synchrony Bank will be your best bet if you have a large balance you want to put in a CD.
Goldman Sachs Bank USA
Goldman Sachs Bank USA offers market-leading rates on its long-term CDs, which can last as long as 6 years.
The bank’s shorter-term CDs, which start at terms of 6 months, still offer great returns.
Goldman Sach Bank USA's CDs have a minimum deposit of just $500.
That's more than Amercian Express' but the better interest rates make up for the slight restriction.
Ally Bank is an online bank that offers a full suite of banking services, including certificates of deposit.
The first is the High Yield CD. This no-frills CD offers a fixed interest rate and a term between 3 months and 5 years.
Ally's interest rates beat out American Express', making it a good choice for people seeking a return on investment.
The second CD available from Ally is the Raise Your Rate CD. You can get a 2-year or a 4-year Raise Your Rate CD.
If you opt for a 2-year CD, you'll have the option to increase your CD's interest rate one time over the CD's term.
If you opt for the 4-year CD, you can request a rate increase twice.
That flexibility protects you from losing out if interest rates rise during your CDs term. You're also safe if rates go down since your interest rate cannot be decreased.
The final option is the No-Penalty CD. With this CD, you will not be charged an early withdrawal penalty.
The only term available for this CD is 11 months.
The interest rate on the No-Penalty CD is less than the High Yield CD offers, so only open one if you're unsure you'll be able to avoid making an early withdrawal.
The Final Verdict
The American Express National Bank CD is a solid choice for many savers, but it isn't the best one available.
Other online banks, like Ally, offer better rates and more options and don't charge any fees.
If you already have other accounts with American Express, it wouldn't be an idea to use them for your CDs.
If your goal is the best rate you can find, you'd be better served at another bank.