With traditional bank account interest rates still at record lows, savers are left in a somewhat conundrum. Do you invest your money into the stock markets for a higher rate of return, albeit by taking on greater levels of risk, or should you instead try to find a deposit account to keep things safe?
If you’re thinking about the latter, then it might be worth taking a look at what CIT Bank has to offer. The institution now offers some favorable interest rates for those happy to lock their cash-up for a set period of time. Although the rates on offer are far from mind-blowing, you’ll get a lot more than you would if you left it sitting in your checking account.
Nevertheless, if you’re considering using CIT Bank to take advantage of its risk-free interest rates, then be sure to read our comprehensive guide. We’ll cover everything from the types of rates on offer, who its accounts are suitable for, how easy it is to access your money early, and whether your cash is really risk-free.
Before we go any further, let’s take a look at who CIT Bank actually is.
Who is CIT Bank and What Do They Do?
CIT Bank were first launched in 2000, which makes them relatively new in the financial services space. They are owned by parent company CIT Group Inc, which is publicly listed on the NYSE with a market capitalization of just over $4 billion.
The U.S. based company offers a range of banking services, much of which centers on savings accounts. This includes a strong focus on its Certificates of Deposit (CD) and Money Market accounts. For those looking to keep things simple, CIT Bank also offers savings accounts.
As we will explore further down, CIT Bank is a member of the Federal Deposit Insurance Corporation (FDIC) scheme. As a result, if the bank ever ran into financial difficulties and thus, was unable to return your money, your funds would be protected up to $250,000 per depositor.
In this sense, placing your savings into a CIT Bank account is as risk-free as it gets. Outside of its main savings, CD and Money Market accounts, CIT Bank is also involved in other areas of financial services. This includes issuing U.S. borrowers with mortgages, as well as conventional home loans.
Unlike traditional banks, CIT Bank does not have any physical branches. As a result, you will need to deposit and withdraw your funds via an online bank transfer.
So now that you have a better understanding of who CIT Bank is what they do, in the next section of our review we are going to explore the basic Savings Builder account.
Savings Builder: up to 1.75% APY
If you’re after a more traditional savings account, CIT Bank currently offers up to 1.75% APY via its Savings Builder account. This makes the Savings Builder account one of the highest paying savings accounts in the U.S. Furthermore, CIT Bank compounds interest on a daily basis, meaning that your money will grow faster.
In order to get started with the Savings Builder account, you need to deposit a minimum of $100. As great as this is, it is important that you understand the fine print.
In order to keep earning the 2.10% interest on offer, you will either need to ensure that you have a minimum account balance of $25,000, or alternatively, you deposit $100 into your account every month. Failure to do this and your 1.75% interest rate will drop down to just 1%.
You won’t be charged any annual maintenance fees with the Savings Builder, nor will you be charged to open an account. In terms of accessing your cash, the Savings Builder account permits a maximum of six transactions. This includes withdrawals, automatic transfers, electronic bank transfers, and even pre-authorized requests.
So how much will you make by keeping your money in the CIT Bank Savings Builder account? Well, if you were to deposit a lump sum of $25,000, and you didn’t touch the money over a five year period, then your money would be worth $28,187.31 when you eventually made a withdrawal.
So now that we’ve covered the Savings Builder account, let’s explore the CD accounts being offered by CIT Bank.
CIT Bank: CD Accounts
On top of offering a basic savings account, CIT Bank also specializes in CD accounts. As these operate in a slightly different way to conventional savings accounts, we’ve explained how they work in more detail below.
In its most basic form, a Certificates of Deposit, or simply CD account, operates in a very similar nature to a traditional savings account. However, unlike a basic savings account, CD accounts most commonly specify a minimum amount that you need to deposit.
Not only this, but most CD accounts have a minimum timeframe that you need to keep the money locked away for before you can make a withdrawal.
Moreover, if the bank in question does allow you to access your funds early, you’re likely to be penalized financially. Here’s an example of how a CD account works.
- The CD account offers a fixed interest rate of 2% per year
- This is based on a 3 year lock-up, meaning you can’t access the funds until the 3 year period has passed
- The minimum investment is $10,000, which is the amount that you deposit
- This means that at the end of the three years, your $10,000 will be worth $10,612 (based on the interest compounding one per year)
Although the above interest rate of 2% is still relatively low, the main attraction of CD accounts is that in most cases, the institution offering them will be part of the FDIC protection scheme, subsequently alleviating all risks for the borrower(upto $250,000).
So now that you know how CD accounts work, let’s take a look at what CIT Bank are currently offering.
Term CD Account: up to 1.75% APY
If you’re looking to deposit your money into an account with a fixed-rate of interest, then you might want to consider the Term CD account being offered by CIT Bank. Unlike the interest rate offered via the Savings Builder account – which is subject to change at any time without notice, the Term CD account allows you to lock in the rate.
This is great if you want to know exactly how much you are going to make, and you don’t want to be affected by a change in interest rates.
As you will see from the image below, the rates on offer will vary depending on how long you want to lock the rate in for. In order to achieve the highest rate of 1.75%, you will need to lock your money for 18 months.
You’ll probably notice that the rate schedule is actually quite sporadic. For example, while CIT Bank will pay you 1.40% for locking the funds away for two years, you’re actually paid less if you lock in the rate for three years. On the other hand, if you go for the four year term, then the rate goes up to 1.75%.
Nevertheless, in order to be eligible for the Term CD account offering – regardless of which term you choose, you will need to deposit a minimum of $1,000.
It is important to note that should you attempt to withdraw your funds before the end of the term you agreed to, then you will be penalized. CIT Bank will charge you between three and 12 months worth of interest. This could wipe out most of your gains, so make sure that you won’t need to access your funds before the term matures.
No-Penalty CD – 2.05% APY
If you like the sound of a CD account, but you don’t want to be penalized for an early withdrawal, then you might be best suited for the CIT Bank’s No-Penalty CD. The term of the CD is only 11 months, which means that its best suited for those looking to save short-term.
Although the No-Penalty CD offers a lower rate of interest in comparison to the Term CD and Savings Builder, the main selling point is that you can withdraw your money out at any time without being penalized. In fact, as long as you wait seven days from the date the money is deposited, you can make a withdrawal without giving any notice, and still keep all of the interest you have earnt upto that point.
The minimum amount that you can invest into the No-Penalty CD is $1,000. There are no account opening or maintenance fees, which is a further bonus. To give you an idea as to how much you will earn, a $10,000 investment for the full 11 months would be worth $10,187.92 at the end of the term. This would represent $187.92 in gains.
Jumbo CD – Up to 1.75% APY
For those unaware, a Jumbo CD is tailored specifically to larger minimum deposit amounts. In return, a Jumbo CD traditionally pays a higher rate of interest. However, CIT Bank actually pays a lower rate via its Jumbo CD offering.
For a minimum investment of $100,000, you will get 1.75% for a five year term. Alternatively, you can also get a two, three, or four year term, which pays 1.45%, 1.40% and 1.60%, respectively. Like all of the other CD products available at CIT Bank, there are no set-up or maintenance fees, and your interest is compounded daily.
As such, if you invested $100,000 over the five term, your 1.75% interest would amount to gains of $8,750, resulting in a maturity value of $108,750.
This doesn’t really amount to much value if you’re currently in possession of a large amount of savings, not least because you can earn higher rates with the other CD products we have discussed. Moreover, you don’t have the option of withdrawing your funds early without being penalized.
So now that we’ve covered the CD accounts on offer, in the next section of our review we are going to cover the Money Market account. Before we do, let’s quickly make sure we understand what a Money Market account actually is.
What is a Money Market Account?
A Money Market account is very similar to a CD account. The reason for this is much like in the case of a CD account, most Money Market accounts require a minimum deposit amount, they restrict withdrawals for a certain amount of time, and the underlying institution is usually covered by the FDIC scheme.
Nevertheless, the main difference is that, as the name suggests, Money Market accounts use your money to invest in the financial markets. As a result, they generally offer a higher rate of interest in comparison to a CD account.
It is important to note that due to the lower rates of interest on offer, Money Market accounts won’t use your money to invest in high-risk financial instruments. On the contrary, it will likely to placed into low-risk assets such as bonds and government securities.
We should also note that Money Market accounts do sometimes allow a limited number of withdrawals per month. If this is offered, then you usually won’t be penalized.
Money Market Account: 1.75% APY
If you’re interested in placing your funds into a Money Market account, then CIT Bank will offer you an APY of 1.75%. While at first glance this is obviously less than what you can earn in the CD and Savings Builder accounts, there are some additional advantages that should be considered.
First and foremost, the Money Market account is ideal if you can’t meet the minimum requirements set out in the other accounts we have discussed. Most notably, this concerns the minimum balance amount, minimum investment amount, or minimum monthly deposit.
In the case of the CIT Bank Money Market account, you can get started with a minimum deposit of just $100, and after that, there is no requirement to deposit anything further. This is ideal if you want to deposit a small amount of funds, and don’t want to be penalized if you can’t add more funds at a later date.
Secondly, the Money Market account also allows you to perform up to six individual account transactions. On top of making transfers, you can also withdraw funds. In doing so, you won’t be penalized as long as you don’t exceed the limit.
So now that you have a firm idea of the many different savings products available at CIT Bank, in the next section of our guide we are going to explore how safe your funds are.
Are my Funds Safe With CIT Bank?
When it comes to the safety of your funds, you’ll be pleased to know that all of the aforementioned CIT Bank products we have mentioned are covered by the FDIC scheme. For those unaware, this means that your funds are protected by up to $250,000.
The FDIC program is backed fully by the U.S. government, and it was installed as a way to boost consumer confidence in the U.S. monetary system. One of the best things about the FDIC scheme is that your interest is also under full protection. For example, if you originally deposited $100,000 with CIT Bank, and you had earned an additional $5,000 in interest, if CIT Bank failed you would still get the entire $105,000.
If you are looking to invest more than $250,000, then you should treat with caution. The FDIC scheme protects the $250,000 figure per depositor, per bank. As such, if you held more than $250,000 with CIT Bank, and they failed, you would only get $250,000 from the FDIC. On the other hand, if you split your investment across multiple banks, you would be covered up to $250,000, per bank.
In terms of regulation, CIT Group – the parent company of CIT Bank, are regulated by the Federal Reserve Bank of New York, as well as the Board of Governors of the Federal Reserve System. This further highlights the safety of your funds.
How Do I Deposit Funds into a CIT Bank Account?
As noted earlier, CIT Bank does not have any physical branches. As such, you will need to do everything online. In order to get started, you need to head over to the CIT website and open an account. As CIT Bank is a financial institution, you will be required to provide the platform with some personal information, and you also need to confirm your identity. The good news is that this is really straightforward with CIT Bank, and there is no requirement to post any documents.
Instead, you’ll need to enter your social security number, and then upload a copy of your government issued ID (driver’s licence or passport). You will also need to provide details about the bank account that you are planning to use to transfer the funds from.
In order to remain compliant with U.S. regulations, CIT Bank can only accept deposits from the account you specify in your account application. If you attempt to send funds from another account, the transfer will be returned.
Once your account application is accepted, you will receive an email from CIT Bank giving you full instructions on where to deposit the funds. You’ll also need to make sure you insert your unique account number when you make the transfer, so that CIT Bank can identify the deposit.
CIT Bank Mobile App
CIT Bank now offers a native mobile app for those using an Android or iOS smartphone device. The app can be downloaded for free from either the Google Play or iTunes store, and you can perform most of the account functions as you would do via the main CIT Bank website.
However, there are a number of complaints in the public domain regarding an inability to transfer funds via the app. Multiple customers that are using the app on their Android device have noted that some account features require you to click a link, which then takes you to the main mobile web browser version of the site. Upon doing so, many of the web pages are not optimized for mobile viewing.
CIT Bank Review: The Verdict?
In summary, CIT Bank offers some attractive savings products. While on the one hand, rates of 2.40% are not world-beating, it is important to recognize that you are effectively investing in a risk-free product. The reason for this is that the FDIC scheme protects your funds up to $250,000 in the event that CIT Bank failed.
The most important thing to consider are the terms of each savings product. For example, in order to get the 2.40% rate via the CD account, you will need to lock your money up for at least 18 months. If you need to access your funds urgently, you’ll potentially lose all of the interest gains you previously made.
If you instead opt for the Savings Builder account, you need to make sure that you maintain a minimum balance of $25,000, or deposit at least $100 per month. If you are unable to do this, or you simply forget, then your 2.40% yield will go down to just 1%.
As such, if you’re unsure as to whether or not you can meet the minimum requirements, or you have a feeling that you might need to access your funds early, it might be best to go with the Money Making account.
Although you’ll only earn 1.75% APY, you are allowed to perform upto six account transactions, which includes withdrawing your funds.