April was another month in which the Federal Reserve repeated a familiar message — current economic conditions warrant no change to its monetary policy. Yet, rates on certificates of deposits (CDs) continued on a slow, downward path.
This month, national rate averages for CDs fell between 0.01% APY to 0.02% APY for maturity durations ranging from six months to five years. The drop may not come as a surprise since the Federal Reserve expects the next federal funds rate increase to occur in late 2014 — a projection that was first disclosed in January.
Don’t stop saving
Rates may be low but the need to grow your savings remains high.
As of April 30, 2012, the top nationwide 1-year CD rate is 1.15% APY from Doral Bank Direct ($1,000 minimum opening deposit). Longer CD terms may not be a wise choice because of the possibility of rate increases in the near future — that is, if the economy improves to a level that convinces the Fed to hike rates.
Using bump-up CDs, which allow depositors to increase their rates, is one way to lock in a higher rate for longer terms without fear of missing better rates. Ally Bank and CIT Bank are examples of online banks that offer these types of CDs. Most CDs available at online banks are likely to beat the national averages.
The table below shows the changes in average national CD rates from March 30, 2012 to April 30, 2012. The figures are based on data acquired from banks that are tracked by MyBankTracker.
|CD Term||APY (as of 3/30/12)||APY (as of 4/30/12)||APY Change|
Another savings alternative is the Series I savings bond. Any I-bonds purchased from May through September will earn at least 1.11% APY if redeemed after one year — that rate is likely to be higher if inflation continues to rise.