The lowly CD mounts a comeback
Charlotte bankers say more customers are considering certificates of deposit as rates rise
The following article appeared in the December 2, 2022, edition of The Charlotte Ledger, a morning e-newsletter with original business and local news for Charlotte. Sign up here:
After years of near-zero returns, some CDs are hitting 4% — and getting a fresh look from customers
by Tony Mecia
With interest rates rising, some local bankers say they’re seeing an increase in customers asking about some less sexy financial products — like certificates of deposit, or CDs.
“We are seeing more people who wouldn’t have considered CDs in the past having more interest now,” said Ashley Cumberbatch, U.S. Bank’s branch banking market leader for North Carolina. “… We are getting more inquiries, more people calling, more people dropping in. I think we have people who are more open to the conversation now.”
Asked about upticks in other financial products, Cumberbatch said: “CDs have the most excitement.”
Seeing “CDs” and “excitement” in the same sentence is unusual, given that they are widely considered to be a more boring place to stash money than, say, in cryptocurrency or derivatives. Although they require locking up cash for months, they provide a predictable return and are federally insured. And now, after years of offering negligible returns, they are offering rates of more than 4% a year.
That might not sound like much, but CD rates over the last decade have been barely above zero. Some consumers now appear to be viewing CDs as a better alternative to leaving cash in a checking or savings account.
“We've got members that are kind of like, ‘Wow, thank you — we’re finally starting to earn some interest on our certificates,’” says Bill Partin, president and CEO of Sharonview Federal Credit Union, who says he recalls issuing CDs at 16% in the early 1980s. “We are seeing some interest there. … Folks are a little jittery with regards to money that’s in the stock market, so we’re starting to see a little bit of interest where folks are coming back over to look at our money market and our short-term certificates.”
Financial advisor Carlton Whitman of Tassel Capital Management says CDs might make sense in certain circumstances — like if you are risk-averse and are setting money aside for a future big purchase and won’t need to access it. But you should also look at high-yield savings accounts, money market accounts and other alternatives, especially those that allow you to withdraw the money if you need it, he said.
“There’s this balance between do I want the flexibility, or do I want a guaranteed rate of return on my cash?” he said.
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Executive editor: Tony Mecia; Managing editor: Cristina Bolling; Staff writer: Lindsey Banks; Contributing editor: Tim Whitmire, CXN Advisory; Contributing photographer/videographer: Kevin Young, The 5 and 2 Project