5% One-Year CDs Proliferate

The number of banks offering 5% APY or higher on 12-month CDs is increasing. Just yesterday Corus Bank increased the yield on its 12-month CD to 5.00%. UmbrellaBank made the jump to 5.05% on Monday. There are now six banks with 1-year CDs paying 5% APY or higher listed at Bankrate.com. The highest is 5.06% APY at M&T Bank of Oakfield, New York. Both Mutual Bank and UmbrellaBank are second with their 5.05% APY. The last three are Corus Bank, GMAC Bank and KeyDirect with 5.00% APY.

As has been the case for the last year, long term certificates of deposit aren't keeping up with these shorter term CDs. Bankrate.com lists only 14 banks with 5-year CDs that have APYs at or above 5%. The highest APY is only 5.12% at KeyDirect which is only 0.06% higher than the best 1-year CD with a term 5 times longer. The only reason to get a 5-year CD would be if you think rates are headed down. I think that's premature. They may not rise as much as last year, but I think there's still more time of rising rates before they start to fall.

If you do want to lock in a high-rate 5-year CD, the best that's nationally available continues to be from PenFed Credit Union with a 5.75% APY 5-year CD. Even with that rate, it's hard to justify that CD over a 5% 1-year CD.