By Frank Cho
Advertiser Staff Writer
Forget the toaster that banks once used to lure new depositors. Airline miles, that virtual currency consumers earn for doing everything from using their credit cards to filling up their gas tanks, are replacing cash rewards at one Hawaii bank.
Bank of Hawaiis Great Escape CD program offers depositors who put $10,000 or more into a 13-month certificate of deposit a choice: interest on the money, about 4.75 percent, or airline miles.
Clearly something has changed.
Experts say that something is a confluence of factors that may be heating up bank competition for consumers dollars.
With interest rates on a downward slide, certificates of deposits earning 3 percent or 4 percent are no longer that attractive to consumers. Still, many are looking for a safe place to park their money while they wait out a volatile stock market.
Meanwhile banks, faced with an improving local economy and loan demand, are looking for ways to grow their deposit base.
"Banks are trying to recapture money that may be coming back from the equities market," said Alvin Sakamoto, senior vice president with American Savings Bank.
Bank of Hawaii, the states biggest bank, said it made sense to marry its popular airlines mileage program with CD customers.
"Like all financial institutions, we are trying ways to bring in new customers. We live in Hawaii, and one of the things that we know is attractive to people is flying," said Lori McCarney, a spokeswoman for Bankoh.
To receive the airline miles, which could be used to buy a ticket up to $800 to anywhere on the Mainland under one program, customers waive interest payments on the certificate of deposit. This allows Bankoh to keep the cash, loan it to other customers and earn more money. Come tax time, depositors still will have to pay taxes on the account as if they received interest.
McCarney declined to say how many people have signed up for the program, but said the bank is happy with the response.