Is the EverBank MarketSafe CD a Good Choice For You?

EverbankEverBank has established itself as a unique player in the web-based banking universe. The bank has only a few branches (all in Florida), but does business primarily on the internet with people in all 50 states.

They offer some of the most unique investment products available. This includes the MarketSafe CD, which functions as a traditional CD under a worst-case scenario, but offers equity participation with more positive market outcomes.

Who is EverBank?

Based in Jacksonville, Florida, EverBank began operations back in 1961. The bank is a diversified financial services company that provides banking, mortgages and investing services. It operates by telephone, mail, and the Internet, and has grown to over $25 billion in assets.

The bank’s product line includes high-interest checking accounts, money market accounts, and certificates of deposit (CDs). They also offer a variety of deposits denominated in foreign currency.

EverBank participates in the Certificate of Deposit Account Registry Service, commonly known as CDARS. This enables them to offer bank investment products with FDIC insurance, even though your collective holdings exceed the FDIC maximum insurance coverage of $250,000 per depositor, per bank.

CDARS works to provide coverage above the $250,000 FDIC limit by opening different accounts at multiple banks. EverBank is part of the CDARS network of banks, so they can distribute your funds into CDs at other banks in the network. As a result, you can have FDIC coverage on multi-million dollar deposits, all while working only through EverBank.

One of the factors that makes EverBank unique is that it neither owns nor operates any Automated Teller Machines (ATMs). However, they will refund ATM fees paid by checking account holders who send in their receipt(s), up to $6 per month.

The EverBank MarketSafe CD

One investment for which EverBank is well known is its MarketSafe CD. These are CDs that are tied to markets such as foreign currencies and commodities. They offer a unique combination of safe principal, fixed interest income, and FDIC insurance protection. They also come with the ability to participate in higher potential income from the underlying asset class.

Resource: How to Build the Ultimate CD Ladder

Some of those asset classes that MarketSafe CDs are tied to include:

  • BRIC
  • BRICS
  • Currency Comeback
  • Commodity Solutions
  • Currency Returns
  • Diversified Commodities
  • Diversified Metals
  • Emerging Markets
  • Evolving Economies
  • Future Economies
  • Gold Bullion
  • Japanese REIT
  • Metals Hedge
  • Power Metals
  • S&P 500
  • Silver Bullion
  • Timeless Metals

MarketSafe CDs are offered at various times, and using different asset class tie-ins. The benefit of the asset tie-in is that you can also participate in growth in the underlying asset class through Market Upside Payments.

At a minimum, you will receive the stated interest on the CD. In addition, the principal amount of the CD is guaranteed and FDIC insured for up to $250,000. But if the asset class behind the CD rises, you will participate in that increase through a Market Upside Payment, at up to 50% of the gain for each component of the asset class.

Neither interest nor the Market Upside Payment will be paid until the CD matures. However, the interest portion will be apportioned to you as original issue discount, or OID, each year until the CD matures. This only does not apply if the CD is held in an IRA (see the Income Tax Reporting on a MarketSafe CD section below for a broader discussion of this topic).

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At maturity, you will receive the stated interest income on the CD, plus the Market Upside Payment, of up to 50% of your original deposited amount. In this way, a $10,000 investment in a CD can pay up to $15,000, plus interest, upon maturity. While such a high return is unlikely, it is at least a possibility with this CD, contingent on the market.

This arrangement enables you to have the safety of an FDIC-insured fixed rate, fixed principal asset, but with the potential for capital appreciation. Plus, if the asset class underlying the MarketSafe CD declines, you will not lose any money.

Other key factors about the MarketSafe CD include:

  • Minimum initial deposit: $1,500
  • CD principal is guaranteed
  • No monthly account fee
  • Eligible for an IRA account
  • US dollar denominated

There are a couple of downsides to the MarketSafe CD. You cannot make an early withdrawal from one of these CDs. In fact, you absolutely cannot receive your principal, interest, or Market Upside Payment until the CD reaches maturity.

EverBank’s Current MarketSafe CD Offering

The specific type of MarketSafe CDs offered changes regularly. EverBank is currently offering MarketSafe Focused Commodities CD. This is a CD based on the performance of gold, silver, copper, nickel, soybeans, and sugar. This CD has a term of five years, and early withdrawal is prohibited.

EverBank has created this CD for those seeking safer exposure to commodities.

Income Tax Reporting on a MarketSafe CD

For federal income tax purposes, EverBank treats MarketSafe CDs as a “contingent payment debt instrument.”

Under this tax treatment, EverBank will report interest income as an amount of original issue discount (“OID”) for each year that you hold this CD, even though interest payments won’t be made until maturity. You will be be required to include the OID on your federal income tax return as interest income.

This interest accrual — referred to as a “Deemed Interest Rate” — will be based on a comparable EverBank Yield Pledge CD interest rate for an equivalent term. The Deemed Interest Rate will be fixed following the Issue Date, and will be reflected on your CD confirmation.

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2 Responses to “Is the EverBank MarketSafe CD a Good Choice For You?”

  1. The terms are linked here :
    https://www.everbank.com/~/media/_docs/marketsafe/core-commodities/2017-03.pdf

    I don’t see anything in there about 50% of the return.

    The way they figure the market return on the commodities is wonky and won’t match actual return.
    They seem to average the price over the 5 years based on semi annual values. Thats going to give you different results.
    e.g. their example figures for gold start at 1189 and end at 1310. Thats about 10% increase.
    But they don’t give you 10% return. They figure the average price and they give you 2.8% return.

    So don’t expect the CD to give you true returns of the commodities. Though it does also limit your risk and guarantee return of principal. But the smoke and mirrors here might just end up paying you 0-3% on average, while you could just get 2.2% in a standard long term CD.

  2. I’m read through this, and looked at the terms. I don’t understand it entirely, so I will not invest in it. Andrews CU – 7 years @ 3% (still here as of 3/2017), 6 month EWP seems like the best bet for CD based returns.

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