Long-Term CDs Get the Cold Shoulder
A new survey of the nation’s 50 largest credit unions and banks revealed that members and customers are still skittish about parking their money in longer-term certificates of deposit.
According to Bankate.com, rising rate CDs are becoming more of an alternative. They tend to fall into three categories: step-up CDs, which rise at predetermined intervals during the course of the CD’s term; liquid CDs that allow investors to transfer money out of a CD to be reinvested in higher-rate CDs; and bump-up CDs where holders can raise their rates a certain number of times during the CD’s term.
The $5.1 billion American Airlines Federal Credit Union in Fort Worth, Texas topped the credit union list in the liquid category with its 60-month Dream Share Plan Certificate that offers an initial annual percentage yield of 2.78%. The $2.8 billion OnPoint Community Credit Union in Portland, Ore., the $3 billion San Antonio Federal Credit Union, the $6.1 billion Security Service Federal Credit Union, also in San Antonio, and the $5 billion Suncoast Schools Federal Credit Union in Tampa, Fla. also made the list.
"In a rising-rate environment or the cusp of a rising-rate environment, investors are very reluctant to tie up their money in longer-term CDs," said Greg McBride, senior financial analyst at Bankrate. "So you start to see rising-rate products coming to market in an attempt to offset the objection consumers have about tying money up at a low fixed rate, only to see interest rates go racing past them."
Bankrate.com said it surveyed the five largest banks and the five largest thrifts based on deposits in 10 large metropolitan markets across the country as well as the nation's 50 largest credit unions. The surveys were conducted from March 8 to March 18, 2011.