In the month of January, some of the biggest names in online banking made significant rate cuts on their certificates of deposit (CDs). These rate reductions contributed to a widespread drop in national averages for CD rates, but 5-year CD rates took the biggest hit unsurprisingly. This has been the trend and it looks like it’ll stick around for a couple more years.
While the national rate averages for CD terms of 12, 24, 36 and 48 months fell by 0.02% APY or less, the national average for 60-month CD rates decreased by 0.04% APY, from 1.21% APY to 1.17% APY.
In addition to dropping rates across their whole lineup of CD accounts, AIG Bank, Discover Bank, and Valley National Bank were among the banks that slashed their 60-month CD rates. Going against the trend, however, is Barclays Bank, which actually raised the rates of its 60-month CD from 1.70% APY to 1.85% APY. Barclays Bank currently has the best 60-month nationwide CD rate.
In January’s Federal Reserve board meeting, no changes to the longstanding monetary policy were announced. The central bank continues to note that interest rates will remain at extremely-low levels until the unemployment rate falls to 6.5 percent. According to the Bureau of Labor Statistics, the unemployment rate stands at 7.8 percent. Fed board members predict that jobs won’t improve enough to justify rate increases until 2015.
Savers will have to decide whether they want to lock in their money in a CD, especially if they opt for a term that’s longer than two years. Otherwise, a savings account or money market account will do, at least until long-term CD rates appear more attractive.
The table below shows the changes in the national average for CD rates from Dec. 31, 2012 to Jan. 31, 2013. The figures are based on data acquired from banks that are tracked here on MyBankTracker.
|CD Term||APY (as of 12/31/12)||APY (as of 1/31/13)||APY Change|
If you plan to open a CD, remember to compare the top CD rates available.