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CD rates are on the rise

WAIT FOR THE RATE! That teasing message, placed in New York City newspapers by Citibank last week, is among a growing number of signs that the battle for consumers' savings is heating up again. Starting in October, federal regulators will let U.S. banks and savings and loans pay whatever interest they want on certificates of deposit. The yield on most CDs is now tied to U.S. Treasury bill rates; a six-month certificate, for example, currently pays about 9.53%.

While the coming battle is unlikely to match the one ignited by last December's debut of bank and S and L money-market accounts, when some institutions briefly offered rates as high as 25%, the competition is likely to be fierce. Dollar-Dry Dock Savings Bank in New York is already luring investors with an annual rate of 13% on a savings instrument that the bank will convert on Oct. 1 to a one-year CD paying at least 10.3%.

Removal of the interest-rate ceiling on CDs represents one of the last major steps in the deregulation of consumers savings deposits. Previous moves have led to innovations like the popular bank and S and L money-market accounts, which pay attractive rates that typically rise or fall weekly. The average yield on such accounts was about 9% last week. The so-called SuperNow accounts, introduced last January, currently pay about 7%, but savers can write an unlimited number of checks against their deposits.

The latest regulatory easing permits several new CD features in addition to the higher rates. Banks and thrifts will be free to set any minimum balance on the certificates they choose. Most CDs, like SuperNow and money-market accounts, currently require minimum deposits of at least $2,500. The changes will also enable institutions to offer certificates that mature in virtually any period of time greater than 31 days and will relax the penalties for cashing in certificates before they come due.

Some experts assert that the high-yielding certificates will further befuddle savers, who already face a bewildering range of choices over where to put their cash. "With all the NOWs, money-market accounts and CDs, consumers are shell-shocked and totally confused," says Richard Bove, a leading banking analyst for Shearson/ American Express. Nevertheless, bankers and savings and loan executives are expected to push the deregulated certificates, if only to keep customers from taking their business to competitors across the street. . This file is automatically generated by a robot program, so viewer discretion is required.