Sallie Mae Bank CD review

Is a high-rate Sallie Mae CD right for you? We detail the competitive rates, terms, and the important requirements, including the substantial minimum deposit.

3.8

Editor's Rating

Written By Thomas (TJ) Porter

Financial Expert

Edited By Jennifer Doss

Managing Editor

Don’t let your money sit idle. Investing it in a vehicle that encourages growth, like a certificate of deposit (CD), can be a smart move.

As you compare top CD rates, you’ll likely encounter Sallie Mae Bank. While their CD rates may be quite impressive, there are other crucial factors to consider before committing your money.

This review will cover everything you need to know about Sallie Mae’s CDs, including minimum opening deposits and early withdrawal penalties, to help you make an informed decision.

Competitive rates

CDs are often able to offer interest rates that are much higher than the rates offered by other accounts, such as savings, checking, and money market accounts.

In fact, the elevated interest rate is the main draw of CDs, so you should always start by comparing interest rates when you’re looking at different CDs.

Sallie Mae achieves its competitive CD rates by operating exclusively as an online bank and by offering:

Lower operating costs: By centralizing operations and avoiding the expenses of rent, utilities, and staff for brick-and-mortar branches, online banks save significant money.
Customer savings: These savings are then passed on to customers in the form of low fees and, critically, high CD rates.
Simple rate structure: Unlike many banks that tier their interest rates based on the deposit balance, Sallie Mae keeps it simple by offering the same competitive rate to anyone who opens a CD, meaning the term is the main factor determining your rate.

The main trade-off for these high rates is the limited customer support, as you cannot speak to someone face-to-face and must rely on help by phone or e-mail.

Early withdrawal penalties

CDs are a lot like savings accounts. They’re a great place to store extra money for the long term and offer interest on the money you deposit.

However, there is a key difference that you have to remember.

Opening a CD involves making a commitment to keep your money in the account for a set amount of time. This is known as the CD’s term.

You have to promise not to make a withdrawal from the CD until the term ends.

Sallie Mae offers a variety of terms for its CDs, including:

6 months
9 months
11 months
12 months
13 months
15 months
18 months
24 months
30 months
36 months
60 months

This huge variety of terms makes it easy to customize your CD with a term that works for you.

Take note of the CDs that have unusual terms (such as 11 or 13 months).

These are promotional CDs that have rates that can be quite different from the rates offered by other CDs with similar terms. Keep an eye out for these offers because you might be able to get a great deal.

When you open your CD, you might be tempted to opt for the longest available term to ensure that you earn the highest available rate.

Resist this temptation.

If you make a withdrawal from your CD before the term ends, you will have to pay a fee. This early withdrawal fee compensates the bank for breaking your agreement.

Sallie Mae bases its early withdrawal penalties on the original term of the CD.

The size of the penalty is calculated using the amount of interest you earn in a day.

CDs with a term of 12 months or less: 90 days’ interest
CDs with a term greater than 12 months: 180 days’ interest

This is the only way that you can lose money by making a deposit to a CD.

If you open a 24-month CD and make a withdrawal after 90 days, you’ll be charged 180 days’ interest.

You’ll forfeit all of the interest that you earned and pay the rest of the fee out of the principal.

Minimum deposit requirements

Many banks enforce a minimum opening deposit for CDs. This is because banks utilize deposited funds to finance activities like lending, ensuring the deposit amount justifies the effort of managing the account.

However, these high minimum requirements can unfortunately block many people from opening CDs. If an individual cannot gather the necessary money, they may be forced to settle for a standard savings account, which typically offers a lower interest rate.

Sallie Mae’s CDs require a minimum deposit of $2,500. This is a notably high barrier, as it is significantly higher than the minimums required by other online banks, and even exceeds the requirements of many traditional brick-and-mortar banks. If you do not have $2,500 available to spare, you would need to look for a CD at a different institution.

A note on insurance: If you plan to deposit more than the minimum, remember that the Federal Deposit Insurance Corporation (FDIC) only insures your account up to $250,000. Any amount exceeding this limit will be uninsured, requiring you to open an additional CD at a separate bank for the remainder to secure full protection.

What happens at maturity

A CD is considered mature once its term ends. This milestone is important because it represents your opportunity to make withdrawals or changes to the CD without incurring any early withdrawal penalties.

Sallie Mae offers a ten-day grace period following the maturity date. Any withdrawals or changes you make during this ten-day window will not be charged a fee.

It is crucial to act during this time. If you wait until the eleventh day, the bank will automatically roll the existing balance into a new CD with a new term, and you will then have to pay an early withdrawal fee if you wish to make any changes or withdrawals.

How Sallie Mae CDs compare to competitors

Sallie Mae’s CDs offer great interest rates, even when compared to other online banks. If you’re really after the best rates available, you should definitely consider opening an account with Sallie Mae.

Where its CDs fall short is in the minimum deposit requirements. Many other banks have lower minimums. Unless you can commit at least $2,500 to a CD, you’ll need to work with another bank.

Regardless of the amount of money you can deposit and what you’re looking for in a CD, you should take the time to at least compare a few options. When you’re comparing CDS from different banks, look at the following factors:

Interest rates: Always start by comparing the interest rates of the CDs. Opt for the highest rate if all else is equal.
Term length: Make sure the bank you’re working with offers a term that works for you. Some banks specialize in long-term CDs and others in short-term CDs.
Maturity process: Take into account what happens when your CD matures. Ensure you have enough time to make changes so you won’t get locked into a new CD.

Conclusion

Though it might be best known as a lender, Sallie Mae’s banking products offer good value.

If you have the money available to deposit and you want to get one of the best interest rates around, you could be well served by a Sallie Mae CD.

About the author Thomas (TJ) Porter

TJ Porter has in-depth experience in reviewing financial products such as savings accounts, credit cards, and brokerages, writing how-tos, and answering financial questions. He has also contributed to publications and companies such as Investment Zen and Echo Fox. He aims to provide actionable advice that can help readers better their financial lives. Education: B.S. in Business Administration, Concentration in Information Systems from Northeastern University.