You’ve Got To Go Longer To Find 3% CDs

Less than a month ago we noted that anyone who wanted to earn 3% on a certificate of deposit would have to lock their money up for at least two years.

Now you’ll have to commit your money for at least two-and-a-half years.

GMAC Bank, which continues to offer the some of the best nationally-available interest rates, has lowered the return on its 24-month CDs from 3.10% to 2.90%.

Intervest National Bank in New York City, is the last bank offering a 3.0% APY on 30-month CDs, and who knows how long that will last?

Soon, you’ll have to commit your savings for at least 36 months to earn 3.0% on a nationally available deal.

That’s why you should always watch for deals from your own bank or credit union.

In Atlanta, for example, One Georgia Bank is offering 3.0% APY on a 7-month CD — but only to its checking account customers.

The Pentagon Federal Credit Union in Alexandria, Va., is paying 3.5% on a 36-month CD, but you’ve got to be a member to buy one.

Savers shouldn’t have to work this hard to earn a lousy 3%, but interest rates are half what they were two yeas ago, falling to a pitiful average return of 1.6% on 24-month CDs and 1.8% on 36-month CDs.

With the Federal Reserve providing banks with all the money they need for next to nothing, they don’t have to compete for your deposits.

Of course the economy will eventually recover, the Fed will raise the rates it charges commercial banks for loans, and they’ll start paying more to attract your savings.

When will this happen? Most economists don’t expect this downward trend to reverse itself until early 2010, and then it will take months — maybe 18 months or more — to return to the reasonable CD rates we enjoyed in 2006 and 2007.