Faced with mounting competition for savings dollars, banks are looking for inventive ways to make their certificates of deposit stand out in the crowd.
And a once-popular technique - offering CDs that pay bonus points pegged to offbeat indicators, such as the performance of a local sports team - is making a comeback.
Kentucky's Salyersville National Bank is one of the latest to try the idea. The bank's Wildcat CD, on the market since November, is linked to the performance of the University of Kentucky's basketball team.
The promotion comes on the heels of a football CD that last year netted more than $930,000 of new deposits for the $54 million-asset bank.
Some bankers are even considering new twists on the bonus CDs, which have generally capitalized on sports themes.
Kevin Tynan, president of Tynan Marketing, Chicago, said several banks in Buffalo, Chicago, and Miami - which he declined to name - are pondering CDs whose bonuses are linked to the amount of snow or rain that falls in a given year.
"There are all kind of possibilities you can link CDs to," said Robert Heady, publisher of Bank Rate Monitor, Boca Raton, Fla.
Mr. Heady said CDs pegged to sports teams were popular vehicles to generate deposits during the 1980s but sales fizzled out when interest rates tanked.
Now he says some banks are dusting off the idea as a way to compete for deposits on something other than interest rates.
"It's safer and a lot more interesting than fooling around with a stock index," Mr. Heady said.
He added, "These CDs are can be great because you get more fun for your buck."
Customers at Chicago's $165 million-asset Peterson Bank certainly thought so. When the world's premier soccer event was kicked off in their city last year, they flocked to the bank's World Cup CD.
The one-year CD gave customers a chance at doubling their base rate of 4.40% if the U.S. soccer team won the world championship.
"People knew it was a long shot," said Karen Perelman, director of marketing for Peterson. "But let's face it, Chicago is a sports town."
The promotion brought in $500,000 in the first two weeks, and though interest tapered off as the team's chances of winning dwindled, she said the bank came out ahead.
Salyersville, which launched its sports CD program to feed a growing demand for home loans, is pleased with the product, according to Tim Weddington, the bank's president.
"The customers have loved it," he said. As of mid-December, the Wildcat CD had garnered more than $500,000 of new deposits. Mr. Weddington said he hopes to get to $1.5 million by the time basketball season ends.
The Wildcat CD pays a base rate of 4.30%. Two basis points are added for each victory at home, and a tournament win gives customers another 5 points. If the basketball team goes all the way to win the national championship, customers would get a whopping 50-basis-point bonus.
Some observers are not convinced that these types of CDs are a good deal for consumers.
"It's more of a fad, I think," said Brent Brodeski, a partner and financial planner with Savant Capital Management Inc., Rockford, Ill. "It has some appeal around the cocktail table or bar, but from a strictly financial point of view doesn't play a big part in a portfolio."
Mr. Brodeski said consumers are better off getting the best rat e they can from the start instead of "gambling" that the rate will go higher.
Mr. Tynan, the marketing executive, couldn't disagree more. A former marketing director for Illinois' Skokie Federal Savings, he was one of the first people to market a sports CD.
"Customers have nothing to lose because of they get a base rate," he said. "It's competitive and maybe they win a little something extra."
While at the Skokie, Mr. Tynan developed a one-year CD that was tied to the outcome of the Super Bowl XX in 1986, when a local favorite, the Chicago Bears, played against the New England Patriots.
"We were looking for ways to bring in new customers," Mr. Tynan said. "And it worked; we brought in $14 million in eight days."
Not all of his ideas have been winners, though. In 1988, Mr. Tynan tried to sell banks on a CD whose bonus was pegged to the outcome of the presidential race between George Bush and Michael Dukakis. But bankers flatly refused, saying regulators might object to a CD with such overt political overtones.
Although most bonus CDs are a long shot for consumers, banks do need to expect the unexpected. Had the U.S. soccer team gone clear to the World Cup finals, for instance, Peterson Bank would have been socked with some unanticipated expenses. Mr. Tynan said banks typically take out insurance policies to hedge against this interest rate risk.