Published On: December 3rd, 2022

The Battle for Deposits

In its continued effort to combat severe inflation, the Federal Reserve raised the target range for the federal funds rate in November by 75 basis points to a target range of 3.75%-4%, marking the sixth consecutive rate hike and the fourth straight three-quarter point increase. These unprecedented moves have caused many financial institutions to play defense in order to prevent customer attrition to higher-yielding substitutes, raising deposit rates to levels not seen since before the Great Recession. For example, the highest nationally available CD rates offered among federally insured banks and credit unions are currently in the 4.00 – 5.00% APY range. Coupled with poor stock and bond market returns and recession fears, the rising rate environment has once again made deposit accounts an attractive investment to consumers seeking a safe haven with guaranteed returns for their investment dollars.

Competition for those dollars has even expanded beyond financial institutions and fintechs to the government. Consider this shocking Bloomberg headline: “Lowly T-Bills are Suddenly Sexy. Yes, Treasury Bills!” Demand for high rate Federal I-bonds offering inflation protection surged to the point that, the website where the bonds are sold, repeatedly crashed.

Motivated by the need to acquire and retain deposits – their primary source of funding for lending activity – our clients are increasingly using our solutions in their marketing and promotional efforts. Some are leveraging our calculators to illustrate the savings growth that customers and prospects can realize with CD specials or ladders. Others use our Guided Selling offering to help consumers determine which account best fits their goals. To learn more about these capabilities, contact us to schedule a consultation.