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About Ken Tumin

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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How Low Can CD Rates Go? 116 Years to Double Your Money?


Every time we think CD rates have bottomed, we see more rate cuts. The latest round of cuts came after the Fed's Mid-2013 pledge and its Operation Twist. Some banks and credit unions have responded quicker than others. ING Direct responded yesterday with CD rate cuts. Even though the savings and checking accounts have maintained competitive rates, it has been rare for ING Direct to offer competitive CD rates. That is certainly the case today. The new lower rates are low even by today's standards. All of the CDs with terms up to 2 years have a rate of only 0.60%. For terms of 30 months to 4 years, the APY is 0.90%. To break one percent, you now need a 5-year CD which has an APY of 1.10%.

ING Direct's 5-year CD APY is now only 10 basis points higher than ING Direct's savings account APY. I'm glad they kept that the same. The Orange Savings Account yield has remained at 1.00% since February.

Unfortunately, the Electric Orange checking account rates fell by 5 basis points. The top tier now matches the 5-year CD with a 1.10% APY. This requires a $100K balance. The $50K tier has a 1.05% APY, and below $50K, the rate is 0.20%.

I think ING Direct should consider rewriting their CD page. On that page they say "The Orange CD - Guarantee yourself a high yield" and "High Interest - Safe place to grow a nest egg".

So let's see how fast you can grow your nest egg with a 0.60% interest rate. If you want to double your money, it will take 116 years. How about the 5-year 1.10% CD? That's not much better. For that to double your money, you'll have to wait 70 years.

Of course the term high yield is relative. It's only high compared to what others are offering. However, many other internet banks are offering CD rates much higher than ING Direct as you can see in our rate tables for 5-year CDs and 2-year CDs (both links are set to show just internet banks).

Even if a bank's rate is higher than the others, there has to be a point in which the word "high" just can't mean high. At the very least when the yield is so low that you can't double your money in one lifetime, that's no longer high.

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Anonymous   |     |   Comment #1
We the average person have no control over what the feds nor govt do other than by our vote. Period. You want change--vote for change in 2012--nothing could be worse than what we have now----we all have our wish list for what we want in the USA BUT we won't get anything until our finances are strong----again--so wouldn't the most immediate thing be get change so our financial well being is strong again?! Vote your choice in 2012----Low int. rates destroy things for everyonw--they increase food and gas, they increase insurance premiums of all kinds --since insurance companies invest in mostly conservative investments--and when they can't make money form conservative investments they raise premiums and lower benefits--all this hurts everyonw--low int. rates may sound on the surface like it will help BUT it really doesn't---I mean years ago a person had a 14% int. rate when buying a home--so what is wrong with a 8% int rate on a home?? Have we all gotten so jadded and spoiled that we must have a 4% int. rate and even that sounds high now???? WElll you may get your 4% int. rate on a house BUT youe expenses overall will go up by 60%--so is that good???? All this for 4 walls and a front door--that you really never own???WE need some reasonable int. rates--after all most people in this country --meaning the average person--svaees at a bank and is not in the stock market----- what happens in 20 yrs if we make nothing from our savings now?? How do we retire?? What happens than?
mak1118   |     |   Comment #2
They don't care what happens in 20 years they have always been shortsighted, they only care about the stock market. Looks like Occupy Wall Street has the right idea.
operation twist
operation twist   |     |   Comment #3
Anonymous   |     |   Comment #4
Anonymous #1.  One additional item is with low interest rates the gov't collects less tax on the interest that CDs, Savings, and Bonds generate.
Bancxman   |     |   Comment #5
The banks are currently awash in cash. With sharply reduced loan demand, they don't need your money. A lot has been said about the Fed's efforts at monetary easing but, in the short run, there's little evidence to suggest that it will work or, for that matter, is even necessary. This isn't the Great Depression. Companies have money. They just aren't spending it. Until that changes, the economy won't pick up and banks will continue to pay low interest rates for savings.

There seems to be a compulsion for some of you to use this Blog as a platform for advocating some sort of political solution to the current economic difficulties. Although I don't own this Blog, I nevertheless recommend that you take yourselves to some other forum that's dedicated to attracting that sort of rhetoric. It's not that I'm so smart but, by now, it should be clear to most reasonably sophisticated readers that politicians are foremost interested in holding power. Whatever they say about the economy is less about factual accuracy and more about saying what they think the voters wants to hear.. So, unless you have a magic bullet that will solve everyone's problems, I'd be genuinely grateful if you'd pack up you soap box and move elsewhere.

mak1118   |     |   Comment #6
I like what you said except for the pack up you soap box it should be pack up your soap box.
Maecl   |     |   Comment #7
To Anonymous # 4:  We shouldn't be paying tax on interest and dividends.  That is money being taxed twice.

To Bancxman:  You can't separate politics from what is happening in banking and elsewhere in the economy.  It is relevant.
Anonymous   |     |   Comment #8
To Bancxman - #5,

The politicians with their policies implied on all of us, ruined our plans and savings.
No,w after they did that, you want to leave them alone, hum!!, are you a politician?
If not, you must be biased against the bleeding poor savers or you are socialist dictator.
Either way, infringing on my free speech puts you at the bottom of my opinion for being
un-American human being.
Anonymous   |     |   Comment #9
Yes, politics, the economy and banking are intertwined.  It has always been that way but it just feels like lately the rhetoric on this website has overwhelmed any productive discussion of the few deals that are left. 

I agree with Bancxman, to those who use this as your personal soapbox please find another forum for your rhetoric and BTW feel free to invite the "oh just here for a laugh because I need it" (maybe you do but that's not what the rest of us are here for), "oooh bobert we miss you", and other assorted posters to go along with you.   Don't worry, the rest of us will struggle along and make it with you somehow.  
scottj   |     |   Comment #14
Wow this is the most pessimistic  I have seen you be Ken, Now i'm getting worried. I'm just hoping as the time passes and we get closer to the mid 2013 pledge we will start to see some increases. Thankfully I don't have another CD mature till the end of 2012 and my average return is still a bit over 3%. Owe much of that to the deals I have found here. 
Anonymous   |     |   Comment #15
The home construction industry has already seen large numbers of unemployed workers.  To raise mortgage rates would only exacerbate that situation.  BTW, I have some money in ING Direct, so I guess I am an idiot.  I don't expect the Orange Savings rate to stay where it is for long given that the CD rates have decreased.
Anonymous   |     |   Comment #16
in reviewing the files 8 19 2010 you have cds in september and october correct ?? penfed article
dbl118   |     |   Comment #17
Relax folks.  It's only going to take 116 years if you open up a 116 year CD at that rate.  Things will improve.  Inflation could be soaring too.. it's really the difference between inflation and rates which is important.

With a little research, a decent income, and a reasonable credit score you can make several thousand dollars from bonuses in a year.  Could be worse.
Anonymous   |     |   Comment #18

'A little research, a decent income, and a reasonable credit score', we can earn several thousand dollars of bonuses in a year? Gosh, sounds great, but could you please explain the details of your reasoning of your eutopia? Thanks.
dbl118   |     |   Comment #21
#18-   Over the last few months there have been no fewer than 5 or  6 different credit card offers where by spending a minimum amount of money you can get $500 bonus (in gift cards, airline miles, or maybe slightly less cash depending on deal).  If you go for them continuously throughout the year, it adds up quickly.  In the last 12 months, there have been at least 3 or 4 offers for $1000 bonus.  There are ways to spend money when you don't really need to spend money, and if you are interested enough you'll find them.  I've netted over $4000 this year, so I don't sweat it too much when my rate goes down another .05%.

#20- Oh my mistake.  I must have missed all of the comments talking about inflation in this thread.  You can't have an intelligent conversation about money rates, without also talking about the spending power of that money.  Unless you just want to gather dollar coins to build a Scrooge Pool, it matters what you can buy with each coin.  One must also consider the extremely low tax rates we currently have.  Younger investors shouldn't be too heavily invested in CDs, and older investors should have made plenty of profit in the market over the last 30 years (and been out of stocks so they missed the recent downturn), so the only people being crippled are those without a plan.
Anonymous   |     |   Comment #19
Has anyone noticed CapitalOne, or the new ING Direct owners, is offering a High Yield Interest Checking Account to all with the first year interest rate guaranteed (it's free of fees with $5,000 minimum; offers either 0.90% or 1.01% APY depending on zip code)?
Anonymous   |     |   Comment #20
dbl118, #17, you are so right....So many uptight dummies here, but you are the master of cool. Very reasuring and your math is something to behold....probably, most of us have never considered interest rates and inflation before so you have opened up a whole new perspective to consider. Could you please elaborate on your thoughts for the rest of us lemmings? You definately Da Man!
Anonymous   |     |   Comment #22
To Anonymous #4

They don't NEED your tax money when they can and will print more money whenever they want some to buy votes with.

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