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Ken Tumin founded the Bank Deals Blog in 2005 and has been passionately covering the best deposit deals ever since. He is frequently referenced by The New York Times, The Wall Street Journal, and other publications as a top expert, but he is first and foremost a fellow deal seeker and member of the wonderful community of savers that frequents DepositAccounts.

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Survey of the Best CD Rates for October 28, 2011

POSTED ON BY

Both the short-term and long-term CD rates fell this week. Ally Bank was an example of this. Its best short-term CD deal is its 11-month No-Penalty CD. That rate fell from 1.01% to 0.95% APY. Its best long-term CD deal is its 5-year CD, and that rate fell yet again this week. It's now 1.89% APY which is down from 1.98% APY last week.

It's now very hard to find CD rates for terms under 1 year with yields over 1.00%. The best 6-month nationally available CD rate is now 0.86% at AloStar Bank.

For 5-year CD rates, it's getting hard to find nationally available 5-year CD rates at banks of over 2.00%. First Internet Bank had the 5-year bank CD top spot last week, but its rate fell this week from 2.20% to 2.00% APY. You can get higher rates at credit unions, but these are also falling. I now have only one 5-year CD yield of at least 3.00%. It's 3.03% APY at El Paso Employees FCU. Last week this had been 3.29% APY.

Not all of the CD news was bad this week. One deal I forgot to mention last week is the CD special at Atlantic Coast Bank. It's offering two good short-term internet CDs: 1.05% APY for a 7-month term and 1.25% APY for a 15-month term.

For long-term CDs, I added another all-access credit union that anyone can join via an association. It's XCEL Credit Union in New Jersey. It has top rates for both 4-year and 5-year terms.

There was one nice surprise in the 5-year CD rates. US Bank did something very unusual. It raised the yield of its 59-month CD special from 2.00% to 2.25% (Hat tip to the reader who posted this in the forum). This is now the best bank 5-year CD rate that's nationally available. If you don't live near a US Bank branch, you can open this online from any state. I'll have more details on this CD in a future post. One important warning about this CD is that it has a harsh early withdrawal penalty. It's half of the entire amount of interest earned (29.5 months).

Long-Term CD Break Strategy

For the short-term CDs in my lists, you might notice CDs with the note "5-year CD closed after X years". These take into account the yield after the early withdrawal penalty is applied. Since Ally Bank's 5-year CD only has a 60-day interest EWP, it's still a good deal when closed early even with the recent rate cuts. However, with DCU's CD rates holding steady, its 5-year CD continues to improve as compared to Ally. Even without the relationship rate, DCU's 5-year CD is a better deal than Ally's 5-year CD when closed as early as 18 months.

As we learned last month, there is some risk that the bank or credit union may increase the early withdrawal penalty on existing CDs (see my post on a credit union that was allowed to raise the EWP on existing CDs).

Another risk is that the institution will make use of a clause in its disclosure to disallow an early withdrawal request. That's another downside with US Bank. According to its disclosure, a "withdrawal prior to maturity will be permitted only with the consent of the bank which may only be given at the time of withdrawal." I have more details in my post Risks and Benefits of Long-Term CDs.

Note About the CD Survey

As I described in my rate table overview, you can use our CD rate tables to find the best rates for both nationally available CDs and local CDs. The Friday blog posts are intended to highlight nationwide CD deals that may not be apparent in the tables. For example, I'll include the post-penalty yields of a few long-term CDs.

The Friday blog posts are also intended to highlight the local CD deals that are available in large metro areas. There are many high CD rates, but most of these are at small banks in rural areas or at small credit unions with very narrow fields of membership. In these local CD surveys, my focus is on local CD deals that are in big cities or that are available in large areas of a state.

Yields Accurate as of October 28, 2011

Under 1-Year CD Rates

  • Noteworthy Local Deals

1-Year CD Rates

  • Noteworthy Local Deals

18-month CD Rates

  • Noteworthy Local Deals

2-Year CD Rates

  • Noteworthy Local Deals

3-Year CD Rates

  • Noteworthy Local Deals

4-Year CD Rates

  • Noteworthy Local Deals

5-Year CD Rates

  • Noteworthy Local Deals

Over 5-Year CD Rates

  • Noteworthy Local Deals

Note: All rates listed above are Annual Percentage Yields (APY) which factor in compounding.

  Tags: CD rates

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Comments
25 comments.
Comment #1 by Anonymous posted on
Anonymous
Yup!!! I remember people kept saying "dont; take a 4% CD"dont atke a 3% CD" Rtaes will go up!! Where are those people now!!! Better paln 5-7 yrs until you see 4% again on a 7yr CD!!! I toold 5 % for 5 and 7 yrs when everyone said "oh we will have hyperinflation--don;t do it--now I am laughing al the way to the bank and all the extra cash I have"--if I lissten to those greedy people--I would be sitting on 1% today---

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Comment #2 by Anonymous posted on
Anonymous
It seems that "going long" has been the way to go for the last few yrs., including through this past summer when 3% plus CDs were still around.  It's hard to make a convincing argument to take a 1 or 2 yr Cd at 1% or around there. 5,7 or 10 yrs. seems to be the way to go.

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Comment #4 by jacob posted on
jacob
Going long is always going to be the way to go as long as EWP are reasonable and trust worthy enough that they wont be changed during the life of the CD. Since the stock market is up alot, its possible rates have bottomed and what should happen from here as long as the stock market stays at this level or goes higher is that slowly banks are going to creep up their rates and eventually the trick of it is to avoid the first movers on this front because competition is finally going to return to the banking system and banks with loan demand are going to have to offer serious promotions to get deposits in. For the next few months though into year end, I certainly wouldnt expect much movement in rates as there tends to be very low loan demand during the last 2 months of the year so backs shouldnt need all that much capital, but there are going to be a few that try and get ahead of the curve and offer some special rates which ken does an amazing job in identifying. 

2
Comment #5 by William (anonymous) posted on
William
2 comments re: Post #4:

1.  There can't be any real trust re: EWP's since the banks can and sometimes do change them.  They can't be part of any realistic CD strategy.  Just my opinion.

2.  The "stock market is up alot," but that can change in any instant.  Hard to make a statement right now that the market will continue in that direction.  And to then say that because of that, that rate have "bottomed" is really taking a leap that no one knows right now.

3
Comment #6 by jacob posted on
jacob
I personally dont think enough money has or will ever be placed in longer term cd's where the banks will have to retroactively change EWP penalties, it just doesnt make sense from a financial standpoint unless their was a very unexpected huge jump in rates which is equally unlikely, so I think its well worth the risk to play in the long term cd. 

As for the stock market, I said "its possible for rates to start rising if the market stays at this level or goes higher", the point is you dont want to jump on the first cd rate increase necessarily because in my opinion there is a direct correlation between cd rates and the stock market although the timing of the cd rate movement has a multi month lag potentially on the way up and on the way down. 

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Comment #10 by Anonymous posted on
Anonymous
Folks, Jacob a troll just trying to bait someone here....and a frequent poster, named Lou, has previously took the bait, learned the hard way, and made a fool of himself.  I agree with #7, Jacob should be banned since his postings are nothing more than a fishing mission. What a shame that he, and his ilk, are allowed to infect this blog.

1
Comment #11 by Richard (anonymous) posted on
Richard
You know, here’s an investment that will pay off handsomely for me for the next ten years.  I would suspect that this investment would not be for over 98% of the readers.  I’m sitting on about 65k earning less than 1%.  My son’s mortgage is about 5% with about ten years left.  I would pay off his mortgage and for all practical purposes act as his mortgage company.  I would be able to receive a great interest rate that’s totally unavailable for savers now, and he would get the freedom of not worrying if he has to skip a mortgage payment or two to pay for something that comes up totally unexpected, without it showing up on his credit report.  Examples of this are if his car or furnace needs to be replaced or he is hit with high medical bills.  I would require that he takes out a term life insurance policy for 250k, payable to me when he dies.  [I would pay the premiums so there are no surprises should he die.]  That amount would cover any money he would still owe me.  The extra money would pay all of his funeral costs that would fall on me anyway.  Plus there would be some money left behind that I can use for his child(ren).  I can get such a term-ten life insurance policy for about $10 per month.  It’s a small price to pay for piece of mind.

For me, the above scenario would work under certain conditions:

1)  First do you trust your son to pay you back?  If the answer is no or maybe not, I would stop at this point.
2)  Is your son financial responsible?  If he isn’t--stop!  You will not be able to change his spending habits. [Taking a look at his credit report may reveal more things than he is will to admit.]
3)  Can you afford to lose every penny that you put into his mortgage payoff without putting yourself in a bind?  If you are counting on a monthly income based on his monthly payments coming in without exception, I would not go with this option.  It would sound to me that you are perhaps dependant on a sure monthly income, regardless of how small it may be.  Money problems are not worth losing family tries over!
4)  Last, and this is what most of us would worry about--what if he stiffs me for the money?  My answer is that it would sure cost him a lot of money!  You see, when I loan my son this money, he is coming out of my will.  My will will state that my son [Name] is not to be included in the will unless there is a signed notarized page by me at the back of the will indicating that my son’s debt is paid off.  The loan amount would be less than the inheritance amount.  This would give him good incentive to pay me back.

Ultimately, I will have no money.  Death is going to take it all away from me.  While I still have some money I would like to maximize the most I can with what I have.  Another thing I have done with my children is matched their Roth IRA saving dollar-for-dollar to get them in a habit of savings for retirement.  The earlier they start, the compounding of interest will pay off.  I offered to matched their contributions only for the first five years of when they could put in the maximum amount.  If they missed a year or two I did not go back to “make up” for it.  It is just their loss.  My last obligation is next year when if my son puts in $2,500 into his ROTH IRA.  I will match the other $2,500.  So he’s starting with an instant 100% earnings on his money from day one.  Once they start following the progress of these CDs they are already hooked on them.  The first of my sons to do this automatically puts away the maximum every year, although I no longer match any of his contributions.  It was just a good way to encourage my children to save.  My son finds it amazing that the banks “are paying me to do nothing!”  My children will have much more money waiting for them in retirement than I ever had in life.  And the figures we use are assuming that Social Security will clasp before they ever receive a single penny out of it.  If it is still here that will be a nice added bonus!

Perhaps this is one way some of your readers can make a healthy profit during these difficult years if they have a trusting son/daughter to whom they would wish to help in this manner.  For me it’s a win-win situation.  For others, it could turn it into one of the worse nightmare that they may have ever encountered.  All these options and angles of the deal must be weighed and considered greatly before entering into such an agreement.

2
Comment #12 by Brett CPA (anonymous) posted on
Brett CPA
Richard #11

Great post, what you write makes a lot of sense from both a practical standpoint and financially.  I would just recommend that you make some sort of written agreement, signed by you and your son, especially if you have other heirs (children). A good attorney/estate attorney could do this for you fairly simply.  Your son is lucky to have you, you sound like a great father.

1
Comment #13 by Pablo Savor (anonymous) posted on
Pablo Savor
Richard #11.

Doing about the same with my son and my sister when it comes to financing the house. Great minds think alike

1
Comment #17 by Anonymous posted on
Anonymous
Richard - Sounds like you have a well thought out plan that makes a lot of sense and I hope it works out well for you and yours. When dealing with family or friends though, a lot of things to be dealt with can come up that would require a strictly business approach, however emotions may creep into the equasion which may make it difficult to stick with the plan....very hard to deal with family or friends if all does not go as planned. As you say, this is not for everyone and, based on my own personal experience, I do not feel ten years of possible family stress would be worth the possible financial gain. Anyway, good luck with your well intended plan. 

 

1
Comment #19 by Richard (anonymous) posted on
Richard
Thank you everyone who commented and gave me their advice on my post.  I greatly appreciate it!!!

1
Comment #20 by SS (anonymous) posted on
SS
Ken do you have an input on TIPs as you did for Ibonds which was very informative. Is there any specific time to buy TIPS and the returns etc?

1
Comment #21 by Bozo posted on
Bozo
Ahem (clearing my throat). As putrid as CD rates are these days, one can usually count on "reversion to the mean". This means, over time, we should see CD rates at "roughly" 100 basis points over core inflation. I'm not sure why, but I suppose it's because commercial institutions offer a premium over the Treasury. If you have a ladder, be patient.

The absolute worst thing you can do is try to market-time yields. That said, if a great short-term deal appears and you can pounce on it, by all means go for it. I'm thinking that 15 month 2.5% Dime Savings CD that came up (then promptly disappeared) in March, 2011. Thanks to Ken, I pounced, before it was yanked.

Think of your CD ladder as a bond ladder (which, in reality, it is). Compare your "duration" (sensitivity to interest rates) with the effective yield of a bond fund. You might find a bond fund is better if your time horizon is greater than the duration of the fund, or you might not. Compute the opportunity cost of rising interest rates on the fund NAV, compare it to your CD ladder, then decide what to do.

When all is said and done, when one subtracts the expense ratio of all but the lowest-cost (read: Vanguard) bond funds, a CD ladder (5 years) is best for risk/reward in a rising-rate environment. Even with Vanguard, a DIY CD-ladder (5-year) is probably preferable. I was told this by the Vanguard Bond Desk some 5 years ago, and I think it's still true.

Just my $.02

2
Comment #22 by Alesiuse (anonymous) posted on
Alesiuse
Bozo #21

Hope you're right about a "rising-rate environment."  It seems like it's been all the other way for years.  You are correct about the need to pounce on any good deals out there, short or long-term.  I have seen, however, that some of Ken's tips have pushed the institution (bank or credit union) to pull the deal very quickly, probably due to heavy response.

1