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How Banks Are Competing With EmigrantDirect


This AP article describes how banks are using CDs to compete with high-yielding savings accounts offered by online banks like EmigrantDirect. Banks are lowering the minimum deposits and offering higher rates when customers also open checking accounts or other products. In addition, banks are making certificate of deposits more attractive in a rising interest rate environment. Some new CD types being offered include:
  • Liquid CD allows a single partial withdrawal without penalty before the CD matures
  • Step-Up CD automatically increases rates at specified times
  • Bump-Up CD allows customer to request one or more rate adjustments
  • Market-linked CD is tied to a stock market index but guarantees no prinicpal loss

Some examples of these that I've found today include:

  • 4.36%, 12-month Rate-Climber CD from First Tennessee Bank. Allows one rate increase during the term.
  • 4.50%, 36-month Option CD from Compass Bank. Allows two rate bumps and two additional deposits. (Rate is for Texas)
  • 24-month Step Rate CD with rates that start at 4.00% and rise to 4.26% (6-months), 4.52% (12-months), and 4.78% (18-months) from Wachovia (Rates are for Texas)
  • 5-year MarketSafe CD guaranteed to earn the greater of either 75% of S&P 500 upside from initial value date to final value dates plus all principal or 100% of principal. Offered by Everbank (previous post on market index CDs)

One other important thing mentioned is that CD rates are negotiable. You can often negotiate with the branch manager to get a better rate.
Vishal Mehta
Vishal Mehta (anonymous)   |     |   Comment #1
Be careful with rate climber CDs since every time you ask for rate increase you renew your CD for a whole new term. It is like renewing your CD for a new term.
Banking Guy
Banking Guy (anonymous)   |     |   Comment #2
Thanks for the warning about the rate climber CD. That's an important point about this CD.