Wednesday, January 20, 2010

CDs Being Promoted as Alternative to Stock Market

In this period of economic uncertainty and stock market variability, many financial institutions are promoting Certificates of Deposits (CDs) as the safe, predictable alternative. Continuing the theme of 'safety and soundness' that began in late 2008 and early 2009, firms like Citibank, Bank of America, ING and many smaller financial institutions are emphasizing the guaranteed rate of a CD. Taking this product a step further, Ally Bank is promoting a CD with a guaranteed rate but no early withdrawal penalty while Capital One is paying a $100 bonus for deposits to CDs or their High Yield Savings account of $10,000 or more.

I expect the marketing of CDs to escalate in the next couple months as banks try to capture their share of the IRA contribution inflow.

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