Amtrust Direct has raised their CD rates so that they now offer the leading rate on 1 and 2 year CDs.

This is the clearest sign yet that small regional players are raising their CD rates to compete with larger players, such as Bank of America / Countrywide, ELoan, Wachovia and Wamu. The rise in longer term interest rates also allows all of these banks to become more competitive.

Amtrust has, like most regional banks, been hit hard by the recent financial crisis so investors would be well advised to keep all deposits below FDIC insurance limits.

Here are some notes of Amtrust services and ease of use:

The bank has always received positive reviews in the forum section of this website. Contrary to certain messages, no hard pull is performed for opening CDs (a hard pull is still done for opening their savings account). Online application allows for funding by ACH transfer, initiated directly by Amtrust, or check (no wire transfers). Accounts may be opened with up to two beneficiaries, but IRA CDs are not available online.

Users report Amtrust Direct to be among the easiest and quickest accounts with which to open an online CD account. The process can be set up immediately online, without external paperwork to fill out, sign and return, and ACH funding instructions can be entered in order to "pull" the funds from another account. Accounts are ordinarily funded within several days.

Interest disbursements can be done every six months for $2.50 by check or free by ACH transfer. The early withdrawal penalty is 3 months of interest for terms 11 months or less, 6 months for terms of 12 to 23 months, 9 months for terms 24 to 47 months and 12 months for terms of 48 months or more.

When CD matures, you can request closure of the CD by either mail or online by a secure message. Payment may be made by check or wire transfer (both $20 fee) or transfer the money to your AmTrustDirect liquid account (e-Savings or e-Money Market account), not ACH transfer.

It started about a month ago with Wachovia when it started offering very competitive Featured CDs. These were suppose to end last week, but they've been extended. Last week Bank of America came out with a very high yield on its 7-month High Yield Online CDs. WaMu is the latest one to offer high CD rates, and it currently has the best deal for a CD term under one year. Below is a summary of these special CDs as of 7/21/08:

• 4.11% APY 7-Month CD @ Bank of America (account review)
• 4.00% APY 6-Month / 4.25% APY 12-Month CD @ Wachovia (account review)
• 4.25% APY 8-Month / 12-Month CD @ Washington Mutual (account review)

When the Fed was cutting rates like crazy earlier this year, I thought we wouldn't see 4% CDs again for some time. But perhaps with increased expectations of higher inflation and future rate hikes along with the banks' need to raise capital (see this BestCashCow article), we're seeing these CD deals. If this continues, it won't be long before we'll see the return of the 5% short-term CD.

I just spoke to a woman from the FDIC regarding Indymac CDs and she told me that holders have several options. They will have six months to cash out the CDs with no penalty or they can keep them at the bank. If they keep them at the bank the FDIC will continue to pay the contract interest rate. But, if another bank comes in and buys Indymac, as I'm sure the FDIC hopes, the bank has the right to adjust the rate paid on the inherited CDs. In that case, the new bank will send a notice to all remaining CD holders. She said it wasn't clear if CD holders would have an opportunity to cash out their CD penalty free at that point.