We have been offering a rate increase on CD's to customers who opened the obligatory free checking deposit account, which of course has been done for the minimum then the account is not used, or is drained and/or closed. Has anyone come up with a viable alternative to something like this, that actually works?

I've pondered the following two options and would like feedback:
1) Only offer the rate increase to established customers, not to new customers. Kind of like a rewards type thing.
2) Tie the CD rate increase to keeping another product with minimum balance requirements (like a MMA or a Rewards checking account. If the reward account is closed, then either a) the rate reverts to original, or 2) the CD is closed also. This of course would require additional contract verbiage.

Thoughts, suggestions, ideas, lottery tickets?

Have a great week everyone!!!! It's pouring in Texas and wintery everywhere else!

Anyone?

Any decisions would be based on your specific marketing strategy. What is your goal? You would utilize different methods depending upon whether you are trying to bring in new money vs. retain existing clients. There is obviously no sure-fire way to make a special offer to a new customer result in a significant relationship if he/she is simply chasing rates and has no intention of moving the core financial relationship.

I understand that, but we're hoping to cause the rate chasers to pause and consider with the DDA/MMA requirement - I guess I was hoping that someone might opine on the legality of tieing the rate exception to the account and adding that verbiage to the contract.
If that is something we can do or not....

Option 2 has good intentions but it is complicated (i.e sales force will shy away from selling it because the will bear customer complaints). You can do it by having a variable rate CD tied to a disclosed pricing structure (could be average monthly deposit balances for the client, or avg deposit balance for a specific checking account, etc); you would also have to disclose frequency of rate change. I would not add any closure clauses, because then you basically start to enter the world of callable CD (and that would make your disclosure much more complex and the management of the product expensive).
Option 1 seems much more effective and markeatable through DM or bankers' calling efforts. You basically reward either customer tenure or their profitability to the bank by giving them a special rate. I would make that a fixed term and a fixed rate.
Yoda66

Yoda66, thanks - that's kind of the option I'm pushing because the other one seems to be to labor intensive, etc - lot of the same concerns you raise.

Thanks again.