CDs May Be Out of Touch With Market Demand
New research from Market Rates Insight showed that banks and credit unions may be offering consumers and members the reverse of what they are demanding with CDs.
Demand for short-term CDs is down 28% but banks and credit unions added 26% more short-term CD products so far this year, according to MRI. In the first nine months of 2010, demand for three-month CDs dropped by 16% from a balance of $277 billion in January to $232 billion at the end of September.
Despite such a substantial decrease in demand, banks and credit unions increased their three-month CD product offering by 10% over the same time period, MRI found. Meanwhile, demand for CDs of three to 12 month terms dropped by 12% from a balance of $502 billion to $443 billion, yet banks and credit unions added 16% more CDs of six, nine, and 12 months terms.
The opposite holds true for long-tem CDs, according to MRI. From January to the end of September, demand for those with three years or more terms increased by 4% from $105 billion to $109 billion. Despite an increase in demand for long-term CDs, banks and credit unions decreased their long-term CD product offering by 24% over the same time period.
"Offering consumers more of what they don't want is not likely to produce positive results" said Dan Geller, executive vice president at MRI. "At a time when developing long-term relationships with customers is paramount, banks and credit unions should be very tuned in and responsive to how consumers vote with their dollars."