bank rates

Most CD Rates Hit New Lows This Week

Bankaholic.comCD rates edged down again this week, but glimpses of economic recovery provide a ray of hope that rates won’t stay low forever.

Bankrate’s weekly survey of large banks and thrifts taken July 15 found the average annual yield for a:

Three-month CD declined to 0.53% from 0.55% the previous week — the lowest average since Bankrate began tracking 3-month CD rates in March 1989.

Six-month CD fell to 0.79% from 0.84% — also the lowest average since Bankrate began tracking 6-month CD rates in January 1984.

One-year CD fell to 1.10% from 1.14%. This is the lowest it’s been since March 2004.

Two-year CD rose to 1.53% from 1.52%. Last month it fell to 1.46%, the lowest 24-month CDs have been since August 2003.

Five-year CD fell to 2.15% from 2.18%. This is the lowest rate since Bankrate began tracking 5-year CDs in January 1984.

Fortunately, higher rates are available if you use our extensive database of CD rates to search for better-than-average deals.

The whole key to better CD rates is tied to an economic rebound. When that gets underway, the Federal Reserve will raise short-term interest rates and banks will have to pay more to borrow money, so they’ll pay savers higher rates on their deposits.

Since the Federal Reserve cut lending rates to the bone last December, banks can borrow money from the Fed for almost nothing. This gives them little incentive to offer consumers a good rate in exchange for their money. But signs of change are in the air.

Unemployment remains a deterrent to economic growth, but weekly jobless claims have been on the decline, jobs lost in June were fewer than expected and the ranks of people collecting benefits for more than one week hit their lowest level since January. Retail sales in June rose and hard-hit manufacturers appear to be on the rebound.

The minutes of the Federal Reserve’s June 24 meeting noted that the end of the recession could be in sight. Improvement in some sectors and an upturn in the financial markets led the Fed to say, “The decline in [economic] activity could cease before long.”

The Fed also suggested we’ll see positive growth in the gross domestic product (GDP) for 2010 and 2011, although concerns linger.

Additionally, the June consumer price index showed retail prices have fallen 1.4% over the last 12 months. That means that the purchasing power of your dollar has increased by that much.

As one economist joked, “You could stick your money in the mattress and earn 1.4% on it.”

Although the mattress option gives you flexibility, if you want to earn top dollar on your savings, CDs are a better choice.

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