bank rates

There’s No ‘Loyalty’ In This CD Deal

I’ve always appreciated banks and credit unions that offer special deals to existing customers–deals in which the anointed depositor (like me) gets something the great unwashed masses can’t.

Often, they take the form of “loyalty” bonuses or bump-ups for renewing maturing CDs.

Sometimes, they appear as “customer-only” promotions, where current depositors are given the opportunity to open CDs at rates higher than publicly posted by the institution.

Recently, I received an offer of the latter variety from First Republic Bank,which is based in San Francisco and has 65 branches on the two coasts.

Conveyed by postcard, it promised “clients” a “reward” of “0.25% over our current CD rates” on CDs opened between May 20 and July 7.

Although I’m technically not an existing “client,” having closed my last First Republic account long ago because of non-competitive rates, I’m flattered to be offered special treatment.

So, I looked into the matter.

When I checked out First Republic’s posted CD rates for Southern California, I found what I expected – low numbers. Here are representative APYs ($5,000 minimum deposit):

  • 1 year: 0.45%
  • 2 years: 0.55%
  • 3 years: 0.65%
  • 5 years: 1.30% (just increased from 1.00%)

I considered none of these compelling, even with a 25 basis point bump-up.

First Republic also offers a 6-year CD at 1.50% APY (just increased from 1.25% APY).

A 6-year CD at 1.75% APY, only 0.01% less than the highest rate for 5-year CDs on our CD Rates Leaderboard, might attract some diehard First Republic customers.

But not me.

The bank also offers something called the “7-Month CD Special,” with a $10,000 minimum and a 0.75% APY.

Adding the 0.25% bonus to that would produce a 1.00% short-term CD.

That would be a very competitive deal, considering that 0.88% APY is the top 6-month CD rate shown by our Leaderboard.

I might be willing to invest some spare cash in that.

When I called the bank, however, I was told the 7-month CD doesn’t qualify for the bonus bump-up.

I must have gotten carried away by the recent surge in 10-year Treasury rates (the 10-year Constant Yield Maturity rate has climbed from 1.66% on May 1 to 2.20% on June 11).

How else could I have thought a bank would offer a 1.00% APY 7-month CD in this environment?

First Republic’s promotion has forced me to face the hard facts about the CD market: there simply aren’t any really good deals out there.

Anyway, the bonus offer lasts until July 7, so maybe the bank will improve rates further between now and then, and produce some bumped-up CD yield worth considering.

But I’m not counting on it.

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