Preserve Your Earning Power with Competitive CD Rates
The recent federal funds rate cuts have sent deposit account rates tumbling. However, there’s a silver lining: you can still secure a competitive return on a certificate of deposit (CD) and protect your earning power. In fact, the top CDs continue to offer rates above 4%.
CD Rates Today: A Snapshot
CDs generally offer rates significantly higher than traditional savings accounts. As of January, the best short-term CDs (six to 12 months) typically offer rates around 4.00% to 4.50% APY. The highest CD rate currently stands at 4.27% APY, offered by NexBank on its 1-year CD term, although it requires a substantial minimum opening deposit of $25,000. Marcus by Goldman Sachs and Synchrony Bank follow closely, offering 4.25% APY on their 1-year and 13-month CD terms, respectively.
A Historical Perspective
The 2000s were marked by significant economic fluctuations, including the dot-com bubble and the global financial crisis of 2008. CD rates plummeted as the economy slowed, and the Federal Reserve cut its target rate to stimulate growth. By 2009, the average one-year CD paid around 1% APY, with five-year CDs at less than 2% APY. The trend of falling CD rates continued into the 2010s, especially after the Great Recession of 2007-2009. However, things changed between 2015 and 2018, when the Fed started gradually increasing rates again, leading to a slight improvement in CD rates.
The Impact of the Pandemic and Inflation
The onset of the COVID-19 pandemic in early 2020 led to emergency rate cuts by the Fed, causing CD rates to fall to new record lows. However, as inflation began to spiral out of control, the Fed hiked rates 11 times between March 2022 and July 2023, resulting in higher rates on loans and higher APYs on savings products, including CDs. Fast forward to September 2024, and the Fed has finally decided to cut the federal funds rate, causing CD rates to come down from their peak.
Choosing the Right CD
When selecting a CD, it’s essential to consider more than just the interest rate. Your goals, the type of financial institution, account terms, and inflation all play a crucial role in determining the best CD for your needs. Decide how long you’re willing to lock away your funds, research CD rates from various financial institutions, and understand the terms of the CD, including the maturity date and withdrawal penalties.
Act Now to Lock in Competitive CD Rates
While CD rates remain high by historical standards, they’re beginning to decline. Now may be your last chance to secure 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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