High-Yield CDs: Red Flags That Signal a Scam

Beware of promotions about certificates of deposit, or CDs, promising interest rates that are substantially higher than current averages. FINRA has observed offers for "low-risk" products with outsized returns. Investors should be wary of unsolicited emails and calls that offer outsized interest from financial institutions, including banks and brokerage firms, particularly those with which you have not had a business relationship.

What might the pitch look like?
In one instance of suspected email fraud, the pitch appeared to come from a large U.S. bank that supposedly was promoting a CD offered by an international banking partner. At a time when most CDs at U.S. banks and credit unions were offering just over 1% for a comparable term, this pitch offered a CD with a 15% yield and contained instructions on how to wire funds.

In another instance of suspected phishing fraud, a caller posed as a representative from a legitimate brokerage firm and claimed to offer information about CDs that were well above the best rates in the market. The offer appeared to be an attempt to gather personal financial information.

Red flags that signal a scam
Red flags that indicate a CD offer may be fraudulent include:

  • Interest rates that are significantly higher than average.
  • Emails with addresses that are not originated and sent by the financial institution that is cited in the promotion.
  • Emails that contain misspellings or grammatical errors.
  • Promotions that claim to be from a U.S. financial institution that has aligned with an international bank.
  • Promotions that claim to be for a "limited time only."
  • Promotions that claim to be directed at "best customers" and that require extremely high minimum investments (for example, 100,000 U.S. dollars).

If you receive an unsolicited email or telephone call
Never provide personal information or authorize any transfer of funds to any unknown person who emails or calls you or to any institution that you have not checked out.

If you aren't sure a communication is legitimate, contact the customer service center or compliance office of the U.S. financial institution that the emailer or caller claims to work for. 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. For email promotions, attach a copy of the promotional email to your correspondence with the firm.

Are higher returns ever possible?
In low-interest rate environments, investors may be tempted to chase higher yields. But always remember that these higher returns come with a cost. While financial institutions occasionally offer slightly higher-than-normal rates on CDs, such offers tend to be for (and may be limited to) customers who open a new account. In other instances, a "market-linked" or "structured" CD can legitimately provide potentially higher yields because its performance depends on the performance of a market index or some other benchmark. But, as the Federal Deposit Insurance Corporation explains, this type of CD is risky and complex -- and differs significantly from traditional CDs.

If you think you've been scammed
If you believe you're a victim of a CD scam, act quickly. Contact your financial institution immediately to report a loss or theft of funds through an electronic funds transfer. If you believe your identity has been stolen, follow the Federal Trade Commission's Identity Theft action plan to protect yourself. FINRA also encourages you to file a complaint using our online Complaint Center or send a tip to FINRA's Office of the Whistleblower.

For more information about saving and investing, visit the investors section of FINRA.org.

FINRA is the largest independent regulator for all securities firms doing business in the United States. Our chief role is to protect investors by maintaining the fairness of the U.S. capital markets. FINRA does not endorse, sponsor, or guarantee, nor is it sponsored by, any advertisers on this site, and any dealings with those advertisers are solely between you and the advertisers.

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