Cadillacs for Free?

In the fierce fight for depositors' dollars, many banks have borrowed the tactics of the midway barker, luring customers with all kinds of promotional promises and "free" gifts. Though savings today are at record highs and loan demand almost stagnant, some bankers believe that consumers may soon begin a monumental buying--and borrowing --spree. To pile up cash reserves for this eventuality, banks are offering ever more opulent gifts to new depositors.

Dennis F. Voss, chairman of the eight-month-old First State Bank of Chicago, has added a new dimension to the flamboyant competition. His bank gives an air-conditioned Cadillac Calais, whose list price is more than $7.000, to customers willing to open a $25,000 account and leave it for five years without interest. Anyone depositing $7,700 on the same terms gets a Ford Pinto. First State and another Chicago bank, Park Way, which was founded by Voss in 1964, also have gifts for those willing to let their cash lie fallow for two years. A depositor gets a mink coat for an account of $15,000, a snowblower for $2,900 and an 18-in. color television set for $2,600.

Figuring in the lost interest, plus the federal income tax that must be paid within a year on the value of the gift, the customer actually profits little by tying up his money. On deposits of $1,000 or more held for at least two years, Voss's bank pays a simple annual interest of 5 3/4%. The five-year return on $25,000 comes to $7,187, or about $187 more than the cost of the Cadillac. Of course, the interest is also subject to income tax, so whether an individual customer comes out ahead by taking the car depends on his entire tax situation.

Federal regulations forbid a bank to give customers premiums that are worth more than the interest that they would otherwise receive. Still, the gift promotion has the appearance of a bargain. So far the Cadillac offer has attracted two depositors, and 75 others have responded to the lure of a color-TV set. One woman is being measured for a mink coat.

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