Even with higher interest rates, CD retention rates have been about 85% (see chart). That’s the good news. The bad news is that retention may drop alongside rates – CDs on the books at, say, 5.25% could mature in a market that may pay only 4.75%, prompting many CD holders to shop.
Never mind that these customers or members may be getting a good deal at renewal – they may think otherwise because the new interest rate only has a 4-handle. This could lead them to check offers elsewhere and possibly switch for only a marginally better rate.
To counter this, work to maximize auto-renewal where it’s profitable and offer attractive rates at a different CD term for rate-sensitive customers. Offering a marquee rate close to the maturing rate to a portion of the renewing book – especially a cohort with a high concentration of first-time CD renewals – can make a significant improvement to overall retention as rates fall.
Monthly CD Renewal Behavior | Traditional Banks | Jan ‘22 – Jan ’24*
Even though CD rollover rates have remained high,
shopping and switching could reduce retention as rates fall.
April 23, 2024
Home Equity’s Trend Toward Digital Will Only Get Stronger
April 18, 2024
Creating Better Friction For P2P Payments
April 16, 2024
First-Time Homebuyers Are Reshaping The Market