CDs and Savings Accounts, Low Return Until the End of 2014

The Federal Open Market Committee (FOMC) released the minutes of their April 24-25 meeting, expanding what was said in the statement of economic policy released just after the April meeting.

The Fed's current policy of keeping rates near zero percent until 2014 was reiterated which isn't a surprise. Low rates of resource utilization, a subdued outlook for inflation and elevated unemployment are the reasons why rates have been near zero percent and will stay low until late 2014.

The Fed has many critics when it comes to the current policy on interest rates. Many Republicans feel the Fed's policy is fanning future inflation which hasn't been the case so far. Low interest rates and quantitative easing (QE) has helped the economy recover from the worst recession since the depression of the 1930's while higher inflation hasn't materialized, not yet anyway.

Some of the biggest losers of the Fed's policy have been retirees who rely on interest income. As one nears retirement the general idea is to have most of your assets in safer investments. Of course some of the safest investments are in certificates of deposit and savings accounts.

Unfortunately the Fed's policy has forced deposit rates to record lows. 1 year CD rates are averaging 0.75% and savings rates are averaging 0.53%. The FDIC's national average rates are even lower. Average 1 year CD rates are at 0.29% and the national average savings account rate is at .10%.

These rates are average rates and you can find rates a little higher than the averages, or considerably higher than the FDIC's national average rates. CIT Bank has one of the highest 1 year CD rates around. CIT Bank's current 1 year interest rate is 1.09% with an APY of 1.10%. The bank's rate is 0.34% higher than the average and 0.80% higher than the FDIC's average CD rate. 

CIT Bank's savings rate is currently at 1.04% with an APY of 1.05%. The bank's savings rate is 0.51% higher than the average savings rate and more than 10 times higher than the FDIC's national average rate.

There are a few other banks offering rates above the averages. Ally Bank is offering a 1 year bank CD rate at 1.04% and a savings rate of 0.84%. You can search our rate tables for other banks and credit unions offering rates above the averages.

Besides CDs and savings accounts the only other investment that has very little risk is U.S. Treasuries. Unfortunately Treasury yields are even lower then deposit rates. In fact when you compare similar term Treasury yields and CD rates, the latter is considerably higher.

For example, you can get a 1 year CD rate as high as 1.10%. Current 1 year Treasury yields are at 0.19%. Going out further on the yield curve, 5 year Treasury yields are currently at 0.84% while the best rates on 5 year CDs are at 1.69% (APY 1.80%) at Third Federal Savings and Loan.