As CD Interest Rates Reach New Lows, Rewards for Shopping Around Grow

As average interest rates on CDs continue to hit new lows, the reward for shopping around for the best CD rates gets greater. Taking a good, long look at CD rates reveals how unusual this year's environment is, and how CD shoppers can use money-rates.com to make the best of that environment.

CD Rates in Historical Perspective

The Federal Reserve publishes data on CD rates going back to 1964. Reviewing this data underscores how extraordinarily low today's interest rates are.

In the last 45 years, the highest rate for 6-month CD rates was 18.34%, in 1980. Until this year, CD rates had dropped below 1% just once before, for two weeks in 2003 when they reached a low of 0.94%. Over the entire period for which the Fed has been keeping records, 6-month CD rates averaged 6.48%.

Today's rate? As of mid-September, it was 0.37%. So far this year, CD rates have been below 1% for 17 weeks and counting. To put that 0.37% CD rate in perspective, consider the following:

• The all-time highest 6-month CD rate is nearly 50 times today's rate.
• The average rate from the past 45 years is more than 17 times the current rate.
• In late September of 2008, 6-month CD rates climbed above 4%, or more than 10 times where they are today.

Let's take a closer look at this last point. You probably never thought you would look back on September of last year as "the good old days," but if you are a depositor, CD yields were certainly much more attractive then than they are now. Yet at the time, you could have argued that 6-month CD rates were more than 2% below their historical average. Surely they couldn't get much lower....

Financial markets have a way of surprising people, and of course the stunning drop in CD rates over the past year is just one of many surprises bank customers have had. Still, rather than being shocked into inaction or overreaction, make the best out of whatever curveballs the markets throw your way.

Making the Best of CD Rates Today

Money-rates.com surveys over 200 different financial products in an effort to bring you the most competitive bank rates possible. Of course, money-rates.com can't bring back the higher CD rates of the past 45 years, or even rates from a year ago. However, they can give you options that are much better than settling for today's low average rate.

As discussed above, the national average bank rate for a 6-month CD was 0.37% as of mid-September. At the same time, money-rates.com listed 18 different 6-month CDs offering rates that were more than a full percentage point higher. Being able to get 1.5% on a CD rather than 0.37% means that you would be quadrupling your annual income from CD deposits. Again, CD rates may be low, but that simply means shopping around is all the more important. 

Source:

Federal Reserve Statistical Release: Weekly Historical Data for 6-Month CDs (Secondary Market) • Federal Reserve: http://www.federalreserve.gov/releases/h15/data/Weekly_Friday_/H15_CD_M6.txt