We are thinking of changing the way we pay interest on CDs. Does anyone have a threshold on the amount the interest needs to be in order to mail the customer a check?

Anyone?

You cannot refuse to send a check at maturity, but you can make your minimum CD $ enough to justify a check. For example, our minimum 14-day CD is $10,000 which currently pays almost $20 per fortnight. The unintended consequence of a $1,000 minimum would make each interest payment <$2.

And, on the other end of the spectrum, if you don't require interest payment at least annually, you must deal with OID for 1099 reporting.

Al

You could, on a going-forward basis, set a minimum amount for a mailed check or third-party ACH (to an account of the depositor at another bank), with the stipulation that any interest amount less than the minimum will be paid to the CD account (with or without compounding).

We have the capability to define a Minimum Check Amount up to $9.99 . If the check is less than the defined amount a check is not produced and the interest is paid to the account. My question is what is the case NOT to produce the check since in our case a notice is still produced. So if the notice is physically produced , what is the difference between mailing a check versus a notice that you did not produce the check? If the notice is produced electronically, then it makes sense.

You must disclose:

(2) Compounding and crediting. (i) Frequency. The frequency with which interest is compounded and credited.

Crediting is either 1) adding the interest back to the account or 2) crediting it to a different account or 3) issuing a check.

Your disclosure is not required to say which method of crediting you use, only its frequency.

The abyss into which interest rates have fallen simply was not on anyone's radar when TISA was rolled out; no one was considering the possibility that banks would consider the amount of interest paid so pathetic as to not be worth the price of a stamp.

Just a personal opinion: Whether required by the regulation or not, your customers should be told in advance if a bank's decision to issue or not issue a check does not fit its historical pattern. If management asks why, just say it's because some customers will care and we do not want to appear to be overly arrogant.

As noted, there is no logic in eliminating the check if you are just going to send a notice instead...

From a total cost perspective, sending a notice is cheaper than sending a check. A check has to be processed when it's presented for payment; while it remains outstanding it has an impact on the reconciliation of the account it's drawn on; if never cashed there are abandoned property concerns; if lost there are the costs of replacement. The postage, while certainly an element of the overall cost, is only the tip if the iceberg.