Scam Alert: Beware of “Too Good to be True” CD Rates

A new scam is being played that involves certificates of deposits (CDs) offering unbelievably attractive yields, according to a warning issued last week by The Financial Industry Regulatory Authority (FINRA).

Average 5-year CD yields have hovered in the 1-2% range for years now, frustrating savers who usually like the safety and surety of CDs as investments. Many Americans are therefore tempted when they receive promotional offers for CDs yielding as much as 15%. But these offers are nothing but scams.

FINRA says that scammers are pushing these offers while posing as legitimate banks, and using email to tout their fraudulent investments.

In one instance, FINRA said, scammers used a pitch that seemed to come from a large U.S. bank, who was allegedly promoting a CD offered by an international banking partner. Americans received an email that in many respects appeared to be legitimate, but was anything but.

FINRA is warning Americans to be on the lookout for some “tells,” or clues that what they are receiving via email is, in fact, a scam.

The big thing to look out for are interest rate (APY) yields that seem too good to be true. Remember, average yields on 5-year CDs these days are a little more than one percent; rates on shorter-term CDs don’t even get as high as 1%. So, when someone is offering you a CD yielding 10 or 15 percent, it is surely not a legitimate offer from a U.S. bank or credit union.

Since many of these scam emails come from overseas crooks (for whom English is not a first language), they will often contain misspellings or grammatical errors.

FINRA said that that latest scams claim to be from a U.S. bank teaming with an overseas bank. Also, the promotions claim to be directed at “best customers” – often requiring a large commitment, ($100,000 is a common figure demanded).

Be on the lookout for offers containing these “tells” and act on any that you receive by notifying your friends and family, your credit union and your state consumer protection agency. It’s good to get the word out on these scams fast, so you can help to stop the crooks in their tracks.

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