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Falling CD Rates? Whew! Well, Maybe Not.

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.
Source: Curinos Curinos Consumer Deposits Analyzer ; FRED. | Note(s): All CD terms included. Traditional Banks only. Simple averages displayed. FF Rate is the upper limit of the target range. Switch includes switch to a different term CD or a liquid account. Jan ‘24 data is subject to change.​

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