GiftsforBanking CD Review: 2-Year CD at 1.85% APY + Gift Valued Up to ~1% APY

applewGiftsforBanking.com has a unique FDIC-insured certificate of deposit that pays out a mix of traditional cash interest and a physical gift. The underlying bank is GObanking.com, which is in turn a division of Flushing Bank. Via DepositAccounts, they just upped their 2-Year CD to a competitive 1.85% APY of cash interest, plus a choice of gifts based on your deposit amount:

In the perfect scenario, you open a 2-year CD with $25,000 (or $50,000) and get 1.85% APY plus a gift worth another 1% APY. (Ex. $25,000 x 1% APY = $250 per year. For 2 years = $500 total.) A theoretical 2-year CD paying 2.85% APY (or even 2.5% APY) would be a top available rate in the current market.

However, it is important to note the following fine print:

*Annual Percentage Yield. APYs are effective as of 8/18/17 and are subject to change without notice. There is a substantial penalty for early withdrawals, including the value of the gift chosen. The value of all gifts will be considered as interest on your account for tax purposes in the first year the account is opened. A 1099-INT statement for the value of the gift (including applicable sales tax, shipping and handling costs) will be issued for the year of gift redemption. Please allow up to three weeks from the time that you place your gift order for delivery of gifts. Photos of gifts may not be exact model. GiftsforBanking.com reserves the right to make gift substitutions of comparable value and assumes no liability for any defects in, or consequential damages relating to gift items. The warranty is the sole responsibility of the manufacturer. CD Reward codes will expire twelve (12) months from the date that the code is first emailed to you.

This brings up the following concerns:

  • You will receive a 1099-INT for the cash interest and the value of the gift (including applicable sales tax, shipping and handling costs). It is unclear exactly what this number is for each specific gift option. It is traditionally the MSRP, but sometimes even that number is hard to figure out. How much extra will they tack on for shipping and handling? In the end, you could be on the hook for taxes on a amount significantly higher than the actual resale value. (Update: Commenter David reports that the $25k/$50k tier gifts will have a 1099 value of $575/$1,100 respectively.) You could try to dispute this amount but is it really worth the trouble?
  • The early withdrawal penalty includes both 6 months of interest plus the value of the gift. That is a relatively heavy penalty.
  • There is a minimum opening balance of $25,000 for each CD.
  • Why does the website look like it traveled in time from 1999?

The good news is that 1.85% APY on a 2-year CD all by itself is a pretty competitive rate. So if you wanted, you could simply consider the additional gift “interest” as a special discount. Instead of paying say $360 for an Apple Watch from Amazon and $80-$95 for a $100 iTunes Gift Card, you might only have to pay income taxes on $500 or so. The key is whether you actually wanted to buy a 2-year CD anyway, either for your cash reserves or as a bond replacement. For comparison, right now a 2-year US Treasury bond only yields 1.32%.

Bottom line. This is a quirky bank CD promotion with the potential to be a good deal, but some important things have to align. You already want a 2-year bank CD. You should be quite confident you won’t withdraw early. You can get good value out of the gift options or are willing to resell. Is the potential extra value worth the added hassle?

Comments

  1. Rudi Pittman says:

    So has anyone confirmed if you get multiple cd’s you get multiple gifts or is there a limit?

  2. What about the fact they can bait and switch? They could Change the intrest rate 3 months in and your locked for 2 years? Any chance the rate would go up?

    • It won’t change, it’s a CD. You’re locked into the rate for 2 years.

    • The rate can only change up until you open the 2-Year CD, at that time the rate becomes locked in for 2 years.

      • Jacob Blumberg says:

        Ok thanks! I think it might be woth it in that case. I got a free ipod for opening a checking account a while back, its nice to get stuff. And in this case its on opening so the interest is basically paid up front.

  3. Hmmm, interesting concept. Given that the gift will be taxable, and a gift tax can be upwards of 50% (like a bonus would), you’re paying about $200 for this watch. And given that the watch can sometimes be had on sale for $100 off, you’re only really saving $100. On top of that, you’re paying shipping and tax which reduces that $100 as well. Not sure it’s worth the hassle unless you were definitely in the market for this watch…or whatever they have available in their catalog. Am I missing something?

    • You will owe income tax at your marginal ordinary rate for the value that they assign to the gift. Your federal marginal rate could be 15% or it could be 40%. It will vary based on your income. They really should just state upfront how much they will add to your 1099-INT, that would make things much clearer. As it is I think they are playing some funny games where they save money from buying these gifts at wholesale prices but then report the interest expense at full market value.

      • Thanks for the response Jon. I spoke with a representative using the number on their site (888-432-5890) and I was able to get the predetermined amount that will be listed on your 1099.

        $25,000 – $49.999 = Gift value on 1099 is $575
        $50,000 – $99,999 = Gift value on 1099 is $1100

        That is predetermined value based on the cost of the item, taxes and shipping. Hope this helps in determining whether it’s a worthwhile investment. At first I thought the Apple watch/Gift Card combo would be ideal, but i wouldn’t get the biggest bang for my buck. The Vitamix is valued at $515 online (Assuming it’s the A3300), so adding taxes, it’s actually not that far off. Now that you know the amounts, which way do you lean?

        • Great, thanks for doing the legwork that I was putting off 😉 Looks like they are doing $500 MSRP + $75 for shipping/handling/sales tax. Could be worse, I was otherwise going to estimate $550. So gift value is the same for all the options on a given tier?

          It all depends, if you really want any of the gifts to keep, you can do the math as to what you’d have been willing to pay for it otherwise. If you are willing to spend the time to resell on eBay or Amazon, you can estimate the profit (say, market value minus 15% for selling fees). I personally don’t really want anything on there (TVs, espresso machines, Apple Watches) but I think the Apple/Bose items along with gift cards are the easiest to value and resell. I do think the total math will still make these effectively 2.xx% APY 2-Year CDs which are top rates but that may or may not excite you.

          • Assuming I really wanted the Vitamix, I would currently pay $515 + 8% NY tax so roughly $560 in cash. We are somewhere between the 28 and 33% tax bracket, so lets assume the latter. That means I’d pay $190 in Federal Taxes (575*33%) plus whatever NY City/State will tax me on?

            The other question is whether you should lock $25k for 1.89% return. Sure, it’s better than other sites, but are we better off waiting for better rates to come around? Market analysis seems to be leaning towards a correction and that might mean better interest rates in the near future. Decisions, decisions.

  4. is shipping free? I dont want them charging me $150 to ship a TV

    • I interpret the wording as saying the shipping is included at no direct cost, but the value of that shipping is included in the $575 or $1,100 taxable value recorded on the 1099-INT.

  5. Anyone called in to see if they will up the promo to have the latest version of the apple watch? I have been calling the # on the website and no one is answering.

    TIA

  6. Just to give you an update, I signed up for the deal. The whole process was quick and painless and the gift arrived within a week of signing up for the account. We were sorta in the market for a new Vitamix so this actually worked out pretty well. I was expecting the current A3200 Vitamix, which is valued at $500. Turns out they gave me the A3500, which is going for $600+tax everywhere at the moment. Given that the Interest statement will show this as $575, we actually did pretty well. Sure, we’ll be paying taxes (high tax bracket mind you), but it’s still MUCH cheaper than what we’d pay for this in the store. Great find!

  7. Gary Smith says:

    Update: As of 10/30, Apple Watch Series 3 is now available.

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