Posted By: Retired DQ
Web ad question - 06/20/03 02:24 PM
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.
Posted By: rlcarey
Re: Web ad question - 06/20/03 02:30 PM
I don't see anything wrong with the statement.
Posted By: Pale Rider
Re: Web ad question - 06/20/03 03:41 PM
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.
Posted By: Retired DQ
Re: Web ad question - 06/20/03 03:51 PM
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.
Posted By: 1111
Re: Web ad question - 06/20/03 05:22 PM
So, what is the kick-up rate tied to?
Posted By: Retired DQ
Re: Web ad question - 06/20/03 05:30 PM
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.
Posted By: Pale Rider
Re: Web ad question - 06/20/03 09:07 PM
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).
Posted By: Pale Rider
Re: Web ad question - 06/21/03 03:05 PM
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.
Posted By: JacF
Re: Web ad question - 06/23/03 02:45 AM
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.
Posted By: VT Banker
Re: Web ad question - 06/23/03 08:30 AM
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.