Rates on Deposits: What’s the Big Deal?

Thursday, February 16, 2023  |   Alexandra Romjue, Senior Data Analyst

With the cost of living on the rise, it is not surprising that rate tracking has increased among credit union and banking consumers, especially among younger generations. If you were able to make money on your funds in your deposit accounts, that would be very appealing, right? Based on rate-tracking activity and the intention to switch financial institutions for better rates may not actually be the be-all and end-all of customer satisfaction.


Rate Tracking Has Increased From 2021

Source: Raddon Research Insights, 2022 Deposits and Investments

Between 2021 and 2022, rate-tracking behavior increased by 6 percent overall. What is even more interesting about the trends in rate-tracking behavior is that 87 percent of Millennials claim to be active/occasional rate trackers as does 77 percent of Gen Z.


Is a Rate Increase Worth It? At Least a 2% Increase Is Needed to Move a Majority of Funds to New Institutions

Source: Raddon Research Insights, 2022 Deposits and Investments

While rate-tracking behavior is at an all-time high, it takes a relatively sizeable increase in rate for consumers to be persuaded to move funds from one institution to another. As illustrated in the chart above, the attraction of moving funds increases more significantly when the rate gap widens by whole percent numbers, with 2.0 percent being the tipping point for more than half of all consumers.


Importance of Rates on Accounts Overall

Source: Raddon Research Insights, 2022 Deposits and Investments

Across all generations, paying competitive rates on deposits doesn’t even make it in the top three most important factors when it comes to choosing a PFI. In fact, paying competitive rates ranks fifth overall when looking at all aspects of an account.

What customers want is an institution that offers fast and efficient service, knowledgeable employees and fair service charges. Consumers are wanting quick and easy solutions online, with their mobile app or when having to go in person/call a representative. Even if you pay competitive rates, if the account opening process is not simple and fast consumers will likely abandon the process and eventually drop you from future product consideration. They also want and need employees who are able to answer questions and offer solutions or who are able to find those answers for them in a timely manner. Consumers may be tracking rates more frequently, but what can help their wallet is fair service charges: overdraft fees, maintenance fees and so on.


When looking to attract and gain a new customer base, some questions to ask yourself are:

  • Do I need to look over and update our charges and fees?
  • Does my institution offer proper training programs and resources to help empower my employees?
  • Do we have a competitive mobile banking system that includes easy loan applications, bill pay and more?

Overall, consumers want an institution that is going to help them when they need it most with their finances. Rates on accounts may be attractive at first glance, however being able to be their trusted advisor and offer quick solutions is what will set you apart from the rest. 

Raddon Report

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