Study: Consumers Are CashingOut Their CDs To Pay Down Debt

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SAN ANSELMO, Calif.-Analysis from Market Rates Insight indicates that consumers cashed in about $200-billion in maturing certificates of deposit during the first half of 2010, and used about 15% ($29)-billion) of the funds to pay down revolving credit such as credit cards and lines of credit.

The remaining balance of the maturing CDs, about $171 billion, was moved to liquid accounts such as Money Market, savings and checking accounts, MRI reported. Total consumer debt (revolving and non-revolving) decreased from $2.451 billion in January 2010 to $2.422 billion in June of 2010-a decrease of $29 billion.

The lion's share of the decrease in consumer debt, during the same time period, occurred in credit cards and other revolving credit.

"We are seeing some of the implications of the low interest-rate environment" said Dan Geller, EVP at Market Rates Insight. "Long-term CDs maturing now are offered a fraction of the interest rate they originally carried. For example, a three-year $10,000 CD that was opened in September of 2007 at the national average rate of 4.32% can now be rolled over for three more years at the national average rate of 1.80%-a reduction of 58% in the return value. As a result, some consumers are opting to cash in their maturing CDs, and pay high-interest credit card balances."

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