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APR vs. APY: What’s the Difference?Metro Areas Where Residents Love Certificates of Deposit
Certificates of deposit (CDs) have long been a great place to stash your savings, especially for conservative investors who want a guaranteed yield. But who are these conservative savers, and where do they live?
In this study, DepositAccounts looked at the percentage of households owning CDs in the 100 largest metros in the U.S. to gauge where this investing product is most — and least — popular.
Until only a few months ago, 1-year CD yields were reaching as high as 3.00%. But CDs as a whole are coming off their recent highs. The federal funds rate hasn’t had a boost since December 2018, and we’re even starting to see the best CD rates decline.
This doesn’t mean that CDs have suddenly become a poor investment. In fact, we found that the households with the most money tend to favor CDs even more. Read on to see where your city ranks.
Key findings
- Among the 100 largest U.S. metros, San Francisco came out on top, with 25.4% of households owning certificates of deposit.
- That’s more a little more than twice as many households, on a percentage basis, than Greensboro, N.C., our bottom-ranked city, where only 12.5% of households own CDs.
- Typically, households in large cities are more likely to sock money away in CDs. Chicago, Los Angeles, New York and Washington, D.C. — among the 10 largest metros in the U.S. — all make our list of top 10 cities where people own CDs.
- There are some exceptions, of course. Odgen, Utah ranks No. 4 in the nation for CD saving: 21.9% of Ogden households have CDs. Note that Ogden is the smallest city on the list of the 100 largest U.S. metro areas.
- Variability in local CD rates may explain some of the difference, as the highest rates available by state can vary by as much as one percentage point. In fact, in Jan. 2019, Utah had the highest average local 1-year CD yield in the country.
Big cities love CDs
This heat map illustrates the differences in CD ownership among the top metro areas in the U.S. The larger cities along the coasts, like Los Angeles and New York City, fall on the higher end of the spectrum, while smaller metro areas in the South and Midwest have fewer CD-owning households.
“My guess is that it's correlated with savings,” says Ken Tumin, founder of DepositAccounts.com. “The richest households will be the ones who invest most in CDs.” Taking this analysis into account, the data suggests that the richest households are in the big cities along the West and East coasts, with an occasional smattering of households in between.
As for why CDs would be so appealing, CDs provide a more conservative and secure place to stash savings compared to, say, mutual funds. This would allow households who have a lot of money to set aside to keep some of their principal safe.
Methodology:
DepositAccounts looked at the 100 largest U.S. metros to find the cities with the highest percentage of households that own certificates of deposit, according to S&P Global in 2019.
Wouldn't it make sense, if not to replace the first chart, to at least include a chart that relates directly with the second one, something on the order of "Top 10 CD-owning cities" . . . ?
We might then put into better perspective remarks in the text, such as
-- San Francisco came out on top, with 25.4% of households owning certificates of deposit
-- The larger cities along the coasts, like Los Angeles and New York City, fall on the higher end of the spectrum
No data is currently displayed to support your comments about any of these three cities!
Problem 1: Who did the survey?
Problem 2: Where the data came from?
Problem 3: Most of the people shop and open accounts online.
Problem 4: The banks / CUs do not give such data voluntarily?
Problem 5: Someone in LA could open CD in TX for a better rate(s).
There are numerous questions pooping up from reading this article, but that should turn some heads to find the truth the alternate way(s). No sources where named for this statistic.
Problem 7, what was the average CD amount in those cities.
I call this article just a teaser or unfinished job or missing the major statistical properties. I grade it from one to ten ( ten being best), this article gets just one. At DA we expect detail reports and correct statistics, any lower than that, it is just a disappointment.
a) Top 10 CD-owning cities
b) Bottom 10 CD-owning cities
What tables actually got posted:
a) Top 10 savings cities
b) Bottom 10 CD-owning cities
Totally incongruous and meaningless! Doesn't anyone care? This entire post is just republishing S&P Global's research and it can't even be done right?
You have picked a potentially valuable topic; however the comparisons do not match up. Rather than comparing top to bottom savings cities; or top to bottom cities with respect to CD investments; you have instead compared top savings to bottom CD owning cities--which is a mismatch. Also, it would be helpful to include footnotes with actual reference citations, rather than a vague and unclear reference to looking at largest US Metros and mentioning S & P Global without citing a particular article or reference. This currently reads like an enthusiastic student book report, but with the suggested edits and clarification, could be of value to Deposit Accounts readers. Editors, please look over such articles more carefully before publishing.
In 2020 we will have one checking account, one brokerage account and one regular use credit card. KISS is our guiding principle.
Famous bank robber Willie Sutton when asked why he robbed banks has been quoted as saying: "Because that's where the money is."
So it's hardly a surprise that people living in relatively wealthier large urban areas are more likely to own CDs. They're probably more likely to own every type of investment.
In any event thank you for the article, and the edits.