Synchrony Bank CDs Review

Aug 03, 2017 | Be First to Comment!

When you want to set aside money for emergencies, an online savings account may seem like the natural choice. If you have a long term goal in mind, however, a certificate of deposit may be the better option.

With a CD, you're committing to saving money for a set period of time. Your savings earn interest and once your CD matures, you can cash it out or roll it over into a new CD. Some CDs offer better rates than savings accounts, which is good if you're saving for something big, like a down payment on a home.

Synchrony Bank is an online bank that offers CDs for savers who want to lock in competitive rates. Learn whether these CDs are suited to meeting your long term savings goals.

Earning Interest With a Synchrony Bank CD

Synchrony Bank uses a tiered scale to set your CD rates. The longer you keep your savings in the CD, the more interest you can earn. That's important to understand as you're choosing a term.

Going with a shorter term means you'll have access to your money faster. Choosing a longer term, on the other hand, could yield more in interest. Ultimately, you have to decide which one you value more.

The rates also vary based on how much you save. For CDs that are 36 months or longer, you have a chance to earn a better rate when you put $25,000 or more in a Synchrony CD. That's good to know if you're a super saver with a lot of money to stash in a CD.

Tip: Use a CD calculator to find out exactly how much you'll earn.

Can You Withdraw Your Savings Early?

This is a really important question and here's why.

When you add money to a CD, you're agreeing to leave it there for the full length of the CD term, until it matures. If you decide to withdraw money from a CD early, the bank can penalize you for doing so. Depending on the bank, the penalty may be a flat fee or a percentage of the interest you've earned so far.

Synchrony Bank can tack on an early withdrawal penalty if you make a withdrawal before the last day of the CD term. The penalty is applied to the amount of principal you withdraw, not the interest.

Early withdrawal penalties vary by term

The amount of the penalty depends on the length of the CD term -- longer terms mean heftier penalties.

Synchrony Bank CD Early Withdrawal Penalties

CD Term Early Withdrawal Penalty
12 months or less 90 days of simple interest
More than 12 months but less than 48 months 180 days of simple interest
48 months or more 365 days of simple interest

There is one exception to the penalty rule. If the person who owns the CD dies before the term is up, you could make an early withdrawal without having to forfeit any of the interest.

You can also withdraw any interest you've earned during the CD term before the maturity date without a penalty. The interest can be transferred internally to a Synchrony Bank money market or high yield savings account, or sent to you via check.

Getting Your Account Opened

Some banks don't require a minimum deposit to open a CD. Unfortunately, Synchrony Bank isn't one of them.

To set up a new CD, you'll need at least $2,000. You'll have to provide the deposit when you first open the CD, or within the first 10 days.

The minimum deposit might be a drawback if you don't have a lot of cash to get started. If that's the case, you may be better off with a CD that has a lower minimum requirement. Some CDs also let you add in new funds after you open the account so you can build your savings over time.

With a Synchrony Bank CD, adding money into a CD after it's already open isn't an option. You'll need to have the full $2,000 or more right from the jump.

Using a Synchrony Bank CD to Save for Retirement

Saving for retirement is an important goal. Squirreling money away into your 401 is one option. If you don't have a retirement plan at work, or you've maxed your plan out for the year, an IRA CD is another to way to grow your savings.

Cut your taxes

Synchrony Bank offers an IRA CD for savers who want to combine tax advantaged savings with the safety of a CD. The terms and interest rates are the same as Synchrony Bank's other CD products. The difference is how an IRA CD is treated for tax purposes.

You can choose between a Roth or traditional IRA CD. Roth IRA CDs follow the same rules as a regular Roth IRA. That means you don't get a deduction for what you save but you can make qualified withdrawals without any tax penalty.

With a traditional IRA CD, your withdrawals are taxed in retirement but you can deduct your contributions, up to the annual contribution limit. As of 2017, the contribution limit for both Roth and traditional IRAs is $5,500, or $6,500 if you're 50 or older.

You may not keep the CD forever

One thing to be aware of if you're considering a traditional IRA CD. You can't leave the money in your CD indefinitely. While you can roll the CD over into a new term when the old one expires, you have to begin taking required minimum distributions at age 70 ½. If you don't, the IRS can assess a 50 percent tax penalty on the amount you're supposed to withdraw.

A Roth IRA CD doesn't have an age limit. There's no point at which you have to take the money out. The caveat is that you can only add money to a Roth IRA CD if you have earned income for the year.

What Happens When Your CD Matures

Once your CD matures, you have a few options for what to do with the money. First, you can roll the CD into a new CD or an existing one at Synchrony Bank. If you choose to roll the CD over, you'll earn the base rate of interest the CD is paying at that time.

The next option is to transfer the principal and interest from the CD into a Synchrony Bank money market or savings account. If you want to deposit the money at a different bank and you have Synchrony Bank account, you could initiate an electronic transfer between them.

If you don't have a Synchrony Bank account, you'll have to settle for a paper check. If you do nothing with your CD when it matures, Synchrony can roll it over into a new CD automatically. Be sure to mark the maturity date on your calendar if you want to avoid that.

Compared to CDs From Other Online Banks

The great thing about online banks is that they give you lots of options when it comes to choosing a CD. To give you a more well-rounded picture of what's out there, here are three other CDs you may want to consider.

Goldman Sachs Bank USA CDs

Goldman Sachs Bank USA offers CDs with terms ranging from six months to six years, which is one year longer than what Synchrony Bank offers. Like Synchrony Bank, the rates on CDs are tiered, based on the length of the CD term.

One thing that may appeal to savers with a smaller budget is the opening deposit. It takes just $500 to open a CD with Goldman Sachs Bank. You are, however, limited as to how much you can save. The most you can add to a CD is $250,000.

Ally Bank CDs

Ally Bank's CDs come with terms ranging from three months to five years, which gives you some flexibility if you have both short and long-term savings goals. There are no maintenance fees for these accounts, although there is a penalty for early withdrawals.

A big difference between Ally and Synchrony Bank is that there's no minimum deposit required to open an account. You may, however, be eligible for a higher rate with a higher opening balance. Still, it's good to know that you can save in a CD even if you don't have a ton of cash. Ally also offers a high yield IRA CD if you're looking for a retirement savings option.

Discover Bank CDs

Discover Bank is the go-to choice if you want to save for the long haul. Savers can choose from a CD term as short as three months or as long as 10 years. The tradeoff is having a higher minimum opening deposit. You'll need at least $2,500 to set up a Discover Bank CD.

Discover's interest rates are tiered and once again, the longer you save, the higher the rate climbs. Like Ally and Synchrony Bank, you've got an opportunity to set up a traditional or Roth IRA CD for your golden years.

Final Verdict on Synchrony Bank CDs

Synchrony Bank CDs have some good points. You can earn a decent amount of interest, especially if you're saving larger amounts or saving over a longer term. You can also ladder multiple CDs so you routinely have one that's maturing. There are, however, some downsides.

One is the minimum deposit. If you don't have $2,000 to save right off the bat, this CD won't work for you. The other is accessing your money if you don't have a Synchrony Bank money market or savings account. Having to wait for a paper check to come in the mail may not be convenient if you need to cash out a CD quickly. Bottom line, take some time to look at all your options to see if another CD may be better suited to how much you can afford to save, and how you quickly you can access funds.

More: Best CDs of the Year
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