Best CD Rates – Certificate of Deposit Rates

My opinion is that with these rates being so low I don’t see why some people bother with CD’s right now. Many people here have mentioned that Creit Unions offer great rates on checking accounts. Mine gives 5% on balances up to $15k. I just need to have direct deposit, log-in to my account 4x a month, and use a debit card 10x a month.
People should really check into their Credit Unions first. Utilize them to the limit for the great rates (if available) then look to CD’s after that.

J.D. You also need to look at the coupon rate. The way I understand it(and I would gladly be corrected if I’m wrong) is if a CD has a coupon rate of, say, 2.00% and its coupon rate is, say, Monthly, then that 2.00% interest would be reinvested monthly. Some have annual, or semi-annual coupon rates, which would decrease the amount of money your money would make for you versus a monthly coupon rate.

Hi, J.D.: Love your blog…always learning from it! I just recently set up savings accounts at http://www.smartypig.com. It’s just an easy way to keep track of your savings goals, keeps your money ‘liguid’, and its current APY is 3.75% (or 3.5, can’t recall just now). Apparently, this is not just an ‘online’ bank. They actually do have a ‘brick and mortar’ site, as well. Go now and check it out. Have any other readers saved with smartypig.com? I can’t remember where I spotted this site…I do believe a GRS reader brought it up in a comment to one of J.D.’s posts. Well, THANK YOU!

@ Frugal Bachelor

From EverBank’s WorldCurrency CD disclaimer:
” it’s important to understand that your deposit will be susceptible to losses or gains due to currency-price fluctuations.”

Be warned that the great interest rate on these CDs might be offset (or more) by a decline in the value of that currency against the dollar.

If you think savings rates are headed even lower in the coming months/year you might lock in a CD at a lower interest rate than straight savings. But I wouldn’t open up a long term CD at a lower rate, you notice HSBC only goes to 24 months.

JD, you question why anyone would put money in a HSBCDirect CD — I question why you still have any money at ING….the only way to keep banks even remotely competitive is for money to move from banks lowering their rates to banks keeping them (relatively) higher

ING will remain fat and happy and continue lowering rates if it knows it will keep its depositors no matter how low it goes. Time to move, buddy.

Running this well-read blog puts you in a leadership position. So Lead.

I have noticed that even with some great rates found online, I have been able to negotiate another 1/2% bonus when at a bank and setting up my CD. I guess its a sign of the times and the desperation of the banks who need the money but I have so far been lucky to get some rates that are better than what is posted online. Try it next time you are considering getting a CD!

Trent,

You might want to look at Charles Schwab for CDs as well. They use what seems to be a CD brokerage which makes it so that if you have to take out your CD prematurely, you may not be penalized.

I too am saddened by the amount I’m getting my money to work for me. Not going to rate chase though for 0.25%

TJ is largely incorrect about the flow of money from one institution to another. It’s not going to have any meaningful bearing on relative interest rates, even if customers do it in large numbers. CDs are default risk-free and they’re usually backed by short-term US treasuries, so when the Fed lowers the interest rate, rates on CDs (and anything else backed by Treasuries) will fall, too.

The question you have to ask yourself is whether or not moving from one bank to another is worth a quarter point gain in interest. Is the extra hassle really worth the effort of opening a new account at a new firm? For a dollar or two a month more, probably not.

Your time would be better used elsewhere.

Rian is largely incorrect about basic supply and demand. If customers settle for a lower interest rate, banks will happily lower the rate. As with any purchase, savings account customers vote with their dollars.

Katy: when a CD auto-renews, the renewed CD keeps the same term as it did on it’s previous run, but in the meantime, the bank may (and probably will) change the rate paid for a CD with this term. In this market, its almost certain that renewal rate will be lower, perhaps MUCH lower

@katy, old CDs roll over to the new rate–you don’t get to keep the old rate.

@JD, I agree that one might buy a CD at a lower rate than a savings account because it’s guaranteed not to go down. Even though you “expect savings accounts to go up by the end of the year,” will they have gone up enough to make up for all the plummeting between then and now? If you buy a CD for 9 months, your money will be available again at the end of the year to roll over into a higher-paying account.

I suspect there’s also a possibility that banks have low CD rates because they really don’t want to offer CDs or because they think they don’t have to compete anymore (but I would have thought banks would want more cash right about now).

My only advice on CDs is to double-check the “substantial penalty for early withdrawal.” At my credit union, that penalty is only 3 months interest or, if lower, total interest earned for CDs of one year or less and 6 months/total for those over one year. I used to get CDs when I really didn’t know if I’d need my money because even with the penalty, the rates were so much higher that chances were that I’d make more. Now rates are barely higher (or not higher at all), so for money I might use in the future, it’s not worth the risk to me.

Also, if you do end up paying the penalty, you can get a deduction on your US income taxes if you use form 1040. Wacky, eh?

I’ve never bought CDs in foreign currencies, but I do know that high interest rates are correlated with high inflation rates, which means, for example, even if you’ve got way more Icelandic kronas after a year, they might be worth so many fewer dollars that you’ve still lost money.

Hard to belive that less than 2 years ago I got a 12-month ING Direct CD with 5.25% APY!

Does anyone know if the international CDs mentioned here are FDIC-insured?
We have almost all of our emergency account in CDs. They are tied up, and I view that as a good thing…not so easy to turn them into spendable cash. It’s worked for us for 15 years, and we’ve (fortunately) never had to use them. But we know that they are sitting there. We go for the “specials” offered by our bank, but as mentioned before, you need to make sure that you mark on your calendar the day it comes due…then you need to roll it over to the most current special, or the best rate fro your time frame.
Also, another point to consider when opening a local bank/CU account: If you have young children who you intend on teaching them money skills, it’s better for them to take their $5 or $2 and give it to a teller, and the teller gives hem a receipt for their money. My girls have a special bank envelope that they put money in at allowance time, or after they do a special chore or babysitting. Every month or 2, we make a trip to the bank, and they have their amount,they fill out the deposit slip, and hand it to a teller, and they get their receipt back with the current balance on it. They also realize that savings is just something we do. My 10 year old has been doing this for years, and it’s almost as if she forgets that she has the money…it’s always a surprise to her when we go to the bank and she realizes that she has nearly $600 saved from her nickels and dimes…hopefully a lesson she’ll have her whole life. When my 14 year old had saved enough to open a CD last year, we looked at the rates, and she was able to lock in a 4.5% 2 year CD. When the CD comes due, she’ll be able to connect the fluctuating interest rates from her first CD to rolling it over and (unfortunately)probably find rates lower at that time. How do children learn this with ING or other online banks?

For good reasons, most people focus on the interest rates, but I would suggest that people also focus on ING’s lack of a minimum investment.
Unless you have a lot of money to put into CDs, the high requirements at most banks makes laddering CDs very hard (JD has a good post about laddering CDs, and ING has a great laddering tool). This makes your money more vulernable to bad timing. By this I mean that a significant percentage of your money could come due for renewal during low rates.
By not having a minimum, even an investor with a small amount of total money to invest can ladder CDs.
Even if you don’t ladder, the lack of minimums can work in your favor. You make just as much money from 10 CDs for $100 than you do from 1 CD for $1,000. However, if you need $200 in the former case, you can close 2 CDs early, and take the hit, while still earning the rate on the other $800. In the case of one big CD, all you can do is close the entire CD.
The very same investors who would benefit from low minimums this way are the ones who don’t see much of a gain from getting .5% more interest.
Like most investment issues, I am not saying that the choice is clear, but you have to take in all the variables, not just interest rates.

At a good-sized regional bank at which I used to work, most of the CD rates were generally not competetive, but there were often “specials” on odd-numbered terms such as 7-month, 13-month, etc. which were always well above other similar terms. (Example: 6- and 8-month CDs were at 0.65%, while 7-month CDs were at 2.25%.) Because they were odd rates, they never showed up on rate comparison surveys (which genereally only list 3, 6, 12, 24 month, etc.). Moral: always ask your bank/credit union if they have any specials!

Thanks TJ!

Man… Suddenly my 1.75% Risk Free CD at BoA doesn’t look so bad! No withdrawal penalty with 1-week notice.

I remember reading an article somewhere (and I wish I could remember now what it was) that said if a particular bank is offering an interest rate that is much higher than what is being offered by other banks, the bank offering the higher than average rate should be avoided as they are in desperate need of cash. This was happening just before Indy Mac went under. They were offering rates that were often 3-5% higher than the industry average.

If a majority of banks are offering rates from 1 – 3.5% and you find one that is offering 5% and up, please do your research first.

Yes, it surprises me too when a bank has lower interest on CDs than on its savings account (E*Trade as the example).

I do think a previous poster has it right, they dont want to be bothered; I guess they feel they must have them listed to be seen as in the market. Benign neglect it sounds like.

This feels a bit like reinventing the wheel, when Bank Deals blog provides a much more comprehensive weekly list.

See also: Pentagon Federal Credit Union (www.penfed.org)
Competitive rates on everything including savings, CDs, and loans. Anyone can become a member. If you read the fine print, you’ll find the loophole.

iGobanking has decent rates as well.

2.0% APY savings; CDs are 1.25% to 3.25% APY, although the 6-month CD is 1.75% APY compared to the 1.25% APY for the 8-month commitment.

http://www.igobanking.com/home/cd_rates

They have no fees, no minimums, easy online transfers. I don’t have any complaints, although it may not be the best option for non-web-savvy individuals.

@JD One reason for locking in a cd at a lower interest rate then a savings account that hasn’t been mentioned is the psychological factor. It is more difficult to surrender a cd for its cash value than it is to empty a savings account. This helps people who have a tendency to spend everything in their accounts to force savings as the money is now tied up for several months/years at a time.

Right now at Navy Federal Credit Union

6 month CD $2500 min 3.0% apy
6 month CD $10k min 3.25% apy
30 month CD $15k min 4.6% apy

And also:
Build Wealth! Join the Military Saves Campaign
New Savers Special Certificate With 3.75% APY* for one year, need to do a direct deposit of $25/minimum
Navy Federal is teaming up with the Military Saves Campaign, which encourages the military community to build long-term wealth through saving and debt reduction. To help you get a savings program started, we’re offering the New Savers Special Certificate for anyone who is a first-time certificate holder.