Black Friday has long> been deemed the shopping highlight of the year for bargain hunters and retailers alike. Millions of shoppers hit the stores in wee hours of Thanksgiving night in hopes of snatching the best deals Friday morning. Stores, meanwhile, hope to push enough merchandise to put their sales numbers in the black.
Now, banks want in on the tradition. On Friday, some institutions like TD Bank -- opened at 6 a.m. to accommodate shoppers cash needs. Others, like ING Direct, rolled out special Black Friday and Cyber Monday deals on mortgages, savings accounts and certificates of deposit. (ShareBuilder, owned by ING Direct, will offer a 20% rebate on all trades on Cyber Monday.)
see the highlights, participating in the Black Friday/Cyber Monday bonanza may be an effective way for the banks to capture consumers attention.
It sounds like one of those trends that will catch on, says Susan Menke, a vice president at market-research company Mintel, which tracks advertising and direct-marketing campaigns.
Whether consumers should take advantage of the deals is another question. While the marketing concept is original at a time of the year when consumers go into spending mode, it s not a bad idea to remind them of the importance of saving a savings account or CD is hardly like a sweater, says Richard Barrington, a banking analyst at Money-Rates.com. You could always use another sweater, he says. But a CD or savings account should be something that was part of your plan to begin with.
Here are the two main factors to consider before buying into a Black Friday deal from your bank.
Banking on a deadline
Many stores offer their best deals for a limited time on Black Friday: a strategy that does wonders for sales, but may not be that great when it comes to banking (for the consumer, anyway).
Consider ING s promotions: The bank is offering $683 off closing costs for consumers who apply for a mortgage, or a $121 bonus to customers who open a checking account, on Black Friday only. The limited deadline may cause you to be hasty and forgo comparison shopping in that case, comparing mortgage closing costs and interest rates from other lenders, or checking account fees and terms from other banks. You have to analyze the terms being offered rationally against other alternatives in the marketplace, Barrington says. You might find that a bank that isn t having a sale still has better terms.
A cashmere sweater may not have been on your shopping list this Black Friday, but you see one for just $20 and give in: Who could resist the bargain? It s a dangerous proposition when transferred to the world of banking.
Unlike impulse store buys, one from your bank may not be easily returned (or undone). Locking in your cash in a CD for 12 or more months may be a bad idea given today s low-rate environment. Having a 1.5% CD yield wasn t a bad deal when we had 1.5% deflation, which was the case for most of this year, Barrington says. But as inflation comes back, CDs and bank rates will have to adjust upward. If you lock in your money in a 2% CD for a year the terms of ING s promotion -- and inflation is 2.5%, you lose.