Experts reveal why banks charge clients for CD transfers

Financial expert Liz Pulliam said that banks charge their CD holders with fees when the latter decides to transfer the CD to another bank. Pulliam says that this should be common knowledge since banks have many reasons for doing so. First, Pulliam says that once a CD owner or holder decides to transfer the CD to another bank, no matter what the type of CD is and its history, the bank considers such an investment as “bad”. This is a way for the bank to collect the final amount from the holder or owner through a transfer fee.

According to Pulliam, it can also be possible that the original banks are trying to deter the CD owners or holders from transferring their CDs to other banks.

Pulliam says that the two month completion process for successful transfer in some banks is already long enough and may even cause CD holders requesting transfer to finally withdraw such decision. In this case, the transfer fee and the two-month difficult process combine to effectively deter CD account owners from transferring their investment.

Though the transfer fee of $50 may be well affordable to some, others may still reconsider the transfer fee expensive. Pulliam reports that the $50 termination fee has deterred several clients from pulling out their investments, and has enabled financial institutions to maintain liquidity and high capital. But Pulliam concedes that some people find it better to pay $50 transfer their CDs to other banks rather than keeping a low return CD from the original bank.

Second, Pulliam says that banks charge transfer fees because of the new financial legislation implemented by the government which aims to provide improved protection of the consumers. Over the years, complaints have been mounting over the unfair practices of financial institutions resulting to the enactment of the new legislation.

Pulliam says that moves by banks to increase or add fees and charges to the already burdened consumer are have just some ways for financial institutions to recover their losses. Applied retroactively, Pulliam states the effect of the economic recession also affected the profitability of many financial institutions in the US. This is why transfer fees have become a huge part of the business scheme by the banks to squeeze out money from their clients.

Finally, Pulliam says that the transfer fees should be expected with higher annual fees on bank accounts, increased interest rates and penalty fees as ways for banks to earn profit.