Tired of Low Interest Rates on your CD? Then Read This

~ By Gerald Rome, Colorado Securities Commissioner ~

Gerald Rome, Securities Commissioner

Gerald Rome, Securities Commissioner

It has been six long years. Six years ago, interest rates on your CD hit rock bottom, and have remained there, like a stagnant pool of water. Savers typically sock money away in whatever instrument has the highest yield. However, this has not always been the best strategy. When rates drop as low as they have, and stayed there for as long as they have, all too often investors, out of frustration, reach for yield, often with dreadful consequences. Scamsters are all too aware of this frustration, and design scams to take advantage of everyone’s frustration with the low rates. In fact, we are now seeing an uptick in promotions for CDs promising interest rates that are significantly higher than current averages. These often include offers for “low-risk” products with high returns.

These fraudulent pitches are surfacing in the form of an email from a large U.S. bank that is apparently promoting a CD offered by an international banking partner. The pitch offers a CD with a 15 percent yield at a time when most CDs at U.S. banks and credit unions are offering just over one percent for a comparable term. Another example that we have seen involves a caller who poses as a representative from a legitimate brokerage firm and offers information about CDs that are well above market rates.

Before going for the higher yield, make sure you check out any of these red flags that indicate a CD offer may be a scam. The red flags include: 1) interest rates that are significantly higher than average; 2) email addresses that do not match the financial institution that is cited in the promotion; 3) emails that have misspellings or grammatical errors; 4) promotions that claim to be from a U.S. financial institution that has aligned with an international bank; 5) promotions that are time sensitive or claim to be for a “limited time only;” 6) promotions that are directed at “best customers” and that require extremely high minimum investments, such as $100,000.

If you aren’t sure a communication is legitimate, contact the customer service center or compliance office of the U.S. financial institution the caller or emailer claims to work for. Don’t ask the caller or emailer for the number. Instead, use the number on the firm’s website or in a publicly available telephone directory. If you are a customer of the financial institution that is being referenced, use the contact information found on your account statements or on the back of the bank’s credit or debit card.

As much as everyone would like to think that today is their lucky day, there is a significant risk that the person on the other side of the phone or email is a con artist looking to steal your hard-earned money. Finally, feel free to contact my agency, the Colorado Division of Securities, and we can verify the information for you. We can be reached at 303-894-2320.

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