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."