Discover Bank is changing the Deposit Account Agreement so they can cancell IRA CDs.

[JerryHowardS]

I received a letter from Discover Customer Service. They are adding the following sentence. We may convert your Traditional or Roth IRA CD to a Traditional or Roth IRA Savings and vice versa via a notice to you.  When I called and asked for an explanation, I was told they may terminate my ten year CD, APY 4.3%, and move the funds to a savings account, APY 3.4% and variable.  Can they legally do this?

[GailL1]

@JerryHowardS @windwood9 

Seems they can - read your Deposit Account Agreement -

per the new changes:

https://www.discover.com/content/dam/dfs/online-banking/documents/NationalDepositAccountAgreement.pd... 

I have copied and pasted the part that seems to fit -

Effective January 17, 2026, the following changes will be effective in the Deposit

Account Agreement: 

First paragraph of the Account Agreement:

• Thank you for choosing Discover®. This Deposit Account Agreement includes the terms and conditions you need to know about your Discover deposit Accounts. Even if this Agreement contains terms for products, features, or processes, it does not obligate us to offer any of those or limit our ability to make changes to them.

Sub-section (f) Individual Retirement Accounts, section (6) Account Ownership:

• We may convert your Traditional or Roth IRA CD to a Traditional or Roth IRA Savings and vice versa via a notice to you.

==============

You do know that Discover has been purchased by Capital One - I think it is now final - the worse part of this is that it also has been changed to variable interest and since that isn’t so bad with a short term CD - it gets real complicated with a variable one with a long length.  Many of the longer term CD’s already had this “viable” provision - read your initial Deposit Agreement.  

If it is any consolation, other banking institutions may also follow this especially if they overdid the rate during the rise - most standard institutions did not - at least not on the longer terms - they gave their rate kick ups on the lesser terms - 12 months to 3-years.

What goes up can come down and it seems that APY interest rates are declining  but how fast is anybody’s guess. 

How many more months/ years do you have before you hit the 10-year mark?  

Per AI:

Here are the key implications of this clause:

• Change in Interest Rate: A Certificate of Deposit (CD) typically has a fixed interest rate guaranteed for a specific term (e.g., 10 years), which is often higher than a savings account rate. An IRA Savings account has a variable interest rate, which may be lower. If the bank exercises this right, your guaranteed, fixed APY would be replaced by a variable one.
• Loss of Fixed Term: The primary feature of a CD is the commitment to a set term in exchange for a fixed rate. This clause allows the bank to end that fixed term and move the funds to an account with no fixed term.
• Flexibility (for the bank): This provision gives Discover Bank the flexibility to manage its liabilities, potentially in response to changing interest rate environments, even if it is not in the account holder's immediate financial interest regarding the rate of return.
• No Early Withdrawal Penalty for the Bank: Normally, withdrawing from a CD early results in a penalty for the customer. This clause allows the bank to close the CD without penalty to themselves, bypassing the agreed-upon terms for the duration of the 10-year period.
• Notice Requirement: The bank must provide you with advance notice before making this change, allowing you time to decide your next steps, such as potentially moving the funds to another financial institution via a tax-free transfer (not a rollover, to avoid the 12-month limit) if you find the new terms unfavorable. 

[JerryHowardS]

Thank You for the reply.  If the loop hole was already in the agreement, why are they adding it now?  Why should they be able to change an agreement after it has been signed?  The "vice versa" they included in the change, means if the savings account rate starts to rise, they can move the savings account funds into a fixed CD at a lower rate.  Since they say they can do that, they will.

[JerryHowardS]

It appears to have been there from the beginning.  It makes the definition of fixed term and rate pointless.

26) AMENDMENTS, ACCOUNT CHANGES, AND NOTICES
We may change the terms of this Agreement at any time. Unless
the law requires us to send you a specific notice, we will decide
what kind of notice we will give you, the timing of the notice, and
the method of providing the notice. If you are unwilling to agree
to such amendments, you have the right to close your Account
prior to the changes taking effect, subject to any Early Withdrawal
Penalties. Your continued use of the Account after the effective date
of the change constitutes your agreement to the Deposit Account
Agreement as amended.

[GailL1]

Yep, just goes to show us how important reading and understanding those Deposit Account Agreements - for the specific type of account - really are.  

This may not be the end of the reduction in interest rate for this Discover Bank product since they are now being changed to a “variable” rate.  

Also, Discover is not opening anymore IRA accounts.

[JerryHowardS]

Today, I am happy to report that I received a different explanation as to what was going to happen on Jan 17. The first explanation said they may convert my traditional IRA CD to a traditional IRA Savings account. Today, when I called, I was told they would not be renewing any traditional IRA CDs after Jan 17. I asked and the banker verified that my 10 year traditional IRA CD which matures in 7 years will be unaffected until then. Maybe I misunderstood or maybe they received enough complaints.

[windwood9]

I received the same letter and have the same concerns.  Especially with the Fed continuing to lower interest rates.