Preserve Your Earning Power with Competitive CD Rates
The Federal Reserve’s recent rate cuts have sent deposit account rates tumbling. However, you can still secure a competitive return on a certificate of deposit (CD) and protect your earning power. In fact, the top CDs currently offer rates above 4%.
CD Rates Today: A Snapshot
CDs continue to outperform traditional savings accounts, with the best short-term CDs (six to 12 months) offering rates between 4.00% to 4.50% APY. The highest CD rate available is 4.27% APY, offered by NexBank on its 1-year CD, although it requires a substantial minimum opening deposit of $25,000.
A Brief History of CD Rates
The 2000s were marked by significant fluctuations in CD rates. Following the dot-com bubble and the global financial crisis of 2008, CD rates plummeted. By 2009, the average one-year CD paid around 1% APY, with five-year CDs at less than 2% APY. The trend continued into the 2010s, with rates hitting record lows. However, the Fed’s rate hikes between 2015 and 2018 led to a slight improvement in CD rates. The COVID-19 pandemic reversed this trend, but the subsequent rate hikes have pushed CD rates to historic highs.
Understanding CD Rates Today
Traditionally, longer-term CDs have offered higher interest rates due to the increased risk of missing out on higher rates in the future. However, this pattern has been disrupted, with the highest average CD rate currently available for a 12-month term. This indicates a flattening or inversion of the yield curve, often seen in uncertain economic times.
Choosing the Right CD for You
When selecting a CD, consider the following factors:
- Your Goals: Determine how long you’re willing to lock away your funds, as CDs come with fixed terms and early withdrawal penalties.
- Type of Financial Institution: Research CD rates from online banks, local banks, and credit unions, as rates can vary significantly.
- Account Terms: Understand the terms of the CD, including the maturity date, withdrawal penalties, and minimum deposit requirements.
- Inflation: Consider how CDs might not keep pace with inflation, especially for longer terms.
Take Advantage of Today’s High CD Rates
Now may be your last chance to lock in today’s high CD rates. Compare the best CD rates available today and ensure you’re earning the best rate possible.
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