Banks have upped their signup bonus game to attract better customers, but this offer from Florida's C1 Bank takes the cake.
The bank is giving away one of four Mercedes Benz roadsters to new customers flush enough to open a $1 million five-year CD.
Bank CEO Trevor Burgess says they're treating the cars like prepaid interest. Rather than waiting for your CD to accrue interest one teeny percentage point at a time, you get your reward before you've earned it.
Here's how the math works out:
You deposit $1 million and C1 applies a 1.20% interest rate (about $12,000 per year). Over five years, that adds up to $60,000. The value of the Benz -- including tax, delivery fee, and registration -- comes to just about that figure, at $61,294.04.
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Why This Should Worry You
Consumers already have enough trouble making long-term financial choices -- and that's without a brand new shiny Benz dangling in front of them.
And Financial Brand -- a B2B site for financial marketers -- is even encouraging more banks to follow C1's footsteps: 'Save it for when your bank or credit union needs deposits, because that day will come again ... This could be a particularly deadly approach to take with the next generation of CD investors -- Gen-Y, also known as Gen Now.'
Chances are not many Gen-Yers can afford a $1 million CD, but credit issuers and banks will cater to this sect in other ways -- with freebies like airline miles, gift cards or cash bonuses.
'I'm very weary of gimmicks like this,' says Stephanie Wei, VP of Nerdwallet's deposit products. 'As you probably know, deposit insurance with the FDIC is only up to $250,000, so you're taking on a risk (if that bank fails)...There are red flags everywhere.'
What's more, chances are high you'll find a far more competitive interest rate elsewhere. We found three credit unions advertising 2% rates on five-year CDs using Nerdwallet's deposit rate tool. On a $1 million deposit, that's a difference of $8,000.
Sure, you don't get all that cash upfront, but it's not like a brand new car is going to gain in value – it starts depreciating the minute you drive off the lot.
The Fine Print
- The offer ends May 31, 2012 and only applies to Florida residents.
- You can only drive off with two cars per household
- You can choose from the 2012 SLK350 Roadster, 2012 E350 Sedan, 2012 ML350 SUV, and 2012 E350 Convertible.
- New consumer deposits only
- Withdraw early and they'll deduct the value of the car from your $1 million deposit
Mandi Woodruff is a reporter for Your Money at Business Insider.
