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#90134 - 06/20/03 02:24 PM Web ad question
DeeQ Offline
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We are offering a "kick-up" CD, which is actually a step-up Cd, in which the CD rate can increase if the rates go up. (I know, ha ha ha). The customer would have to go to a branch in order for the increase to take effect. We have the following verbiage on our website:

"Our New Kick-Up CD: If interest rates increase so will your return. Visit the nearest office for all the details."

Someone in my office told me this is not compliant because it should say "...rates may increase". I don't get it.

Compliant or not? Thanks all.
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#90135 - 06/20/03 02:30 PM Re: Web ad question
rlcarey Offline
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I don't see anything wrong with the statement.
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#90136 - 06/20/03 03:41 PM Re: Web ad question
Pale Rider Offline
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Just a guess but the use of "will" implies the step up is automatic. I believe you said the customer must visit a branch to get the increased rate. On an unrelated question, do most banks start these step rate accounts lower than stated rates. Shouldn't the customer have to absorb some of the increased cost ? There is value in allowing the rate to float up. Just curious.
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#90137 - 06/20/03 03:51 PM Re: Web ad question
DeeQ Offline
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Actually, the initial is one of our regular 12 month rate,but a longer term and it only bumps up when the rates go up, and only when the customer comes in to ask for the step-up. I believe it was created to help retain deposits.
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#90138 - 06/20/03 05:22 PM Re: Web ad question
1111 Offline
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So, what is the kick-up rate tied to?

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#90139 - 06/20/03 05:30 PM Re: Web ad question
DeeQ Offline
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A very subjective senior officer.
Kidding aside, the rates are based on the ebb & flow of our cash needs & our loan rate spread (amongst some other factors) and not tied to any specific index.
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#90140 - 06/20/03 09:07 PM Re: Web ad question
Pale Rider Offline
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I don't think these are tied to indicies, like loans. They are tracked against the bank's rate sheet or rate board, whatever rates the bank is offering until the CD matures. The customer must be aware of the rates offered and must go into the bank to "step up". Our finance guys won't allow the retail people to do this unless the customer pays for the option privilege up front (usually by getting a lower than market rate to start with).
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#90141 - 06/20/03 09:29 PM Re: Web ad question
1111 Offline
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Quote:

A very subjective senior officer.
Kidding aside, the rates are based on the ebb & flow of our cash needs & our loan rate spread (amongst some other factors) and not tied to any specific index.




WOW! You actually disclosure the internal elements noted above as the factors used to determine whether or not rates will increase? Customers actually go for this set-up?

So, if you need funds during the covered term, rates go up all around, versus just on new funds and as maturities come up - if you don't, rates stay the same.

This is a product that actually can be sold to willing buyers in your area?

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#90142 - 06/21/03 03:05 PM Re: Web ad question
Pale Rider Offline
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It appears you have scant experience in asset/liability or deposit pricing strategies. This is a great product if the public believes rates will go up before the maturity of their CD and they want the advantage of sharing in rising interest rates.
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#90143 - 06/21/03 05:46 PM Re: Web ad question
1111 Offline
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Quote:

It appears you have scant experience in asset/liability or deposit pricing strategies. This is a great product if the public believes rates will go up before the maturity of their CD and they want the advantage of sharing in rising interest rates.




If the public believes that rates will go up? Sure, sell that idea to the public in the short-term - the product may be good, but not for the public. A&L is easy when you only consider the needs of the bank, not the customers.

Actually, your comment shows scant experience in this area, as products that provide something for everyone are the products that sell. Asking customers to bet that rates will go up in the short-term and offering an initially below market rate in case that happens is not a good product for customers at this time.

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#90144 - 06/22/03 04:49 AM Re: Web ad question
JacF Offline

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Quote:

Asking customers to bet that rates will go up in the short-term and offering an initially below market rate in case that happens is not a good product for customers at this time.



I don't see a below market rate here. Maria stated that the CD starts at the 12 month rate (but for a longer term.) As a consumer, I would like that. If the rates go up, I can increase my earnings. If the rates go down, I can maintain the current rate for longer the 12 months.

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#90145 - 06/22/03 03:49 PM Re: Web ad question
1111 Offline
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1111
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Quote:

Quote:

Asking customers to bet that rates will go up in the short-term and offering an initially below market rate in case that happens is not a good product for customers at this time.



I don't see a below market rate here. Maria stated that the CD starts at the 12 month rate (but for a longer term.) As a consumer, I would like that. If the rates go up, I can increase my earnings. If the rates go down, I can maintain the current rate for longer the 12 months.




Re-read your post, specifically "for a longer term" - is there a part of that below market rate statement don't you understand? To explain - if the same rate is offered, but the term is extended (due to a "possible step-up in this case") without adjusting the initial rate that is a below market rate since rates paid generally go up by extending the term.

I would like to see if this product actually sells.

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#90146 - 06/23/03 02:45 AM Re: Web ad question
JacF Offline

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I understand just fine, my friend. I understand that just because "rates paid generally go up by extending the term" doesn't mean that is always the case (remember the rate environment of 3-4 years ago.) Also, we don't know how much longer the term is. Is this an 18 month cd paying a 12 month rate, while I could get a better rate on a vanilla 18 month cd? I don't know, it's not my bank. But I'd be willing to bet that the term isn't so much longer that it encroaches on the territory of the next term (and thus rate) tier of the bank. Add to that the benefit to the customer if rates go down. With the current product selection, after 12 months the customer's cd would roll over at then-market rates, which, as we have already established for this scenario, are lower than the current rate. But with this product, the customer earns the current (read:higher) rate for a longer period than the customer with the 12 month cd.

It's a win-win product for the consumer.

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#90147 - 06/23/03 08:30 AM Re: Web ad question
VT Banker Offline
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VT, USA
Our bank has offered this product off and on for the last six years. It is very popular during a low interest environment. The customers love it; they figure they can't lose.
It also has a marketing advantage because we find our customers monitor the rates and call or visit a branch to check the rate frequently. This allows an opportunity to market other products or services to them VS. the usual CD customer that invests and you don't usually see or hear from them until maturity.





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#90148 - 06/23/03 12:11 PM Re: Web ad question
DeeQ Offline
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Quote:

I don't think these are tied to indicies, like loans. They are tracked against the bank's rate sheet or rate board, whatever rates the bank is offering until the CD matures. The customer must be aware of the rates offered and must go into the bank to "step up".



Exactly, and we must remain competitive with other banks in our area. At the deposit end, you don't always tie things to rate indices as Burback said. Other factors, such as again, the bank's monetary needs and surrounding banks' rates, play an important role.

And the question was referencing the ad, not our products. Any feedback on the web ad?
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