12 Month CD Rates

Let’s face it, 12 month CD rates and all deposit rates are horrible these days. We seem to keep chasing rates down to new lows every week.

Do you remember scoffing at a 4.00 percent rate last fall when banks were scrambling to shore up their reserves with depositor funds before TARP? Finding a 3.00 percent rate these days would be a treat when the average rates on a 12 month certificate of deposit is less than 2.25 percent. When you factor in the rate of inflation, or deflation, things aren’t as bad as they seem.

One thing we can say for certain is rates will eventually start to go back up so don’t lock into long term certificate of deposits. Stick with shorter term CDs. The longest term we would invest in a CD is 12 months at this time. You find rates in the 2 percent to 3 percent range, which isn’t much worse than longer term CD rates. Five year certificate of deposit rates are around 3.50%.

No reason to lock in longer term at these low interest rates when rates will be higher by the end of the year or early next year.