Best national 1-year CD rates move up to 1.35%
It's now been six weeks since the Federal Reserve raised interest rates, which makes it six weeks that we've been waiting for banks to begin following suit.
And what do we have to show for it?
Across the seven CD terms we track, the top nationally available yield has sat unmoved in three terms, while actually dropping in three others.
Only 12-month certificates have seen their top national rate rise since the Fed took action in mid-December.
But don't bother with champagne glasses. The 1-year increase is a measly bump from 1.30% to 1.35% APY.
Fortunately, credit unions and community banks still offer better-paying local and regional deals, with the best returning almost 2%. But here too, we're seeing mostly the same rates we saw before the Fed's increase.
It's a disappointing state of affairs for savers, who now seem to be left waiting for the next Fed hike before better CD yields start arriving.
When that might happen is a crystal-ball question, but we'll tell you what we know.
The top national deals
Today’s top yield of 1.35% APY is a high-water mark for national 1-year CDs over the last 4½ years.
After plunging in the spring of 2011, the leading 12-month yield wavered between its post-recession low of 1.05% and 1.10% APY for all of 2012 and half of 2013.
Since then, the top yield has followed an upward but faltering path, with Colorado Federal Savings Bank twice elevating it to 1.35%.
But it abandoned the lead about a month later each time.
Since early January, the leader has been Main Street Bank, which first appeared in our CD rankings after drastically raising its 1-year return from an unranked 0.50% APY.
A community bank with two branches in the northern Detroit suburbs, Main Street sells its CDs in person and through the mail with a minimum $500 investment.
TOP 12-MONTH CD RATES: Nationally Available Bank Yields
|Main Street Bank||1.35%||$500|
|Capital One 360||1.30%||No minimum|
|Live Oak Bank||1.30%||$2,500|
|BAC Florida Bank||1.26%||$1,500|
|State Bank of India – Chicago||1.26%||$2,500|
|Triumph Savings Bank||1.25%||$1,000|
|Sallie Mae Bank||1.25%||$2,500|
|California First National Bank||1.25%||$5,000|
|Colorado Federal Savings Bank||1.25%||$5,000|
|State Bank of India – New York||1.17%||$5,000|
|First Internet Bank of Indiana||1.11%||$1,000|
|Ally Bank||1.05%||No minimum|
Earning more with local deals
As is often the case, savers can find better 1-year returns by turning to credit unions and community banks.
In fact, three credit unions even offer nationwide deals in the 1-year range:
- USAlliance Federal Credit Union is offering new members 1.51% APY on 15-month certificates, available to select residents of Massachusetts and Connecticut, those who work for certain employers in New York and anyone nationwide who donates to an affiliated charitable organization.
- Mills42 Federal Credit Union is paying 1.40% APY on 15-month CDs for those who live or work in Lowell, Massachusetts, and the surrounding area or anyone in the country who makes a qualifying donation to Mothers Against Drunk Driving.
- XCEL Federal Credit Union is offering a special 12-month CD paying 1.50% APY, available to anyone who joins the American Consumer Council. XCEL will even refund the ACC membership fee to you.
For those who live in the right place or work for the right employer, it's possible to make even more from 1-year CDs.
The best return on strictly local deals is pushing 2% this month.
TOP 1-YEAR CD RATES: Credit Union, Community Bank Deals
|Bank||States||Term (in months)||APY|
|Peoples Transport Federal Credit Union||New Jersey||12||1.94%|
|Self Reliance New York Federal Credit Union||New York||12||1.92%|
|TEXAR Federal Credit Union||Texas, Arkansas||15||1.75%|
|Farmers State Bank||Iowa||15||1.72%|
|Four Corners Federal Credit Union||Arizona, Colorado, New Mexico, Utah||12||1.56%|
|Pioneer Federal Credit Union||Idaho||13||1.55%|
|Service Credit Union||Military, New Hampshire, Massachusetts||11||1.50%|
|Idaho Central Credit Union||Idaho, Nevada||12||1.50%|
|North Platte Union Pacific Employees Credit Union||Nebraska||12||1.50%|
|Direct Federal Credit Union||Massachusetts||15||1.50%|
|Triangle Credit Union||Massachusetts||15||1.50%|
|Rockland Federal Credit Union||Massachusetts||11||1.40%|
|Bridgeton Onized Federal Credit Union||New Jersey||12||1.40%|
|Premier Credit Union||Iowa||14||1.40%|
|Walpole Co-operative Bank||Massachusetts||15||1.40%|
|F&A Federal Credit Union||California||12||1.36%|
If you qualify, these deals are worth your effort because they all pay about five times more than the current average 12-month return of 0.27% APY, according to our weekly nationwide survey of banks and thrifts.
Watching for a Fed impact
Average 1-year returns had fallen as low as 0.22% APY and still sat there in January 2014. But improvements have been painfully slow, totally stalling out between 0.27% and 0.28% APY for 15 months now.
Of course, all of these rates are a far cry from the 12-month average of 3.78% APY we saw in February 2007 — before reckless mortgage lending plunged us into the Great Recession.
The dramatic descent to today’s rates is a result of the Federal Reserve aiming to stave off a complete financial collapse by dropping interest rates to about zero in December 2008 — and keeping them anchored there for the last seven years.
Last month, that dismal period technically ended, with the Fed’s rate-setting committee approving what's expected to be the first of several small increases in the federal funds rate.
That’s what banks pay to borrow money from each other through the Fed, and when it rises, banks become more financially motivated to attract deposits from consumers, in theory improving their rate sheets to do so.
The Fed has indicated it expects to "normalize" rates by moving them gradually upward over the next several years, at times suggesting three or four small rate hikes in 2016.
But global stability concerns, historically low gasoline prices and the struggle for inflation to reach a healthy level all will weigh on the rate committee's decision of when to time the next hike.
The Fed will next meet March 15-16. But with its high dependence on real-time economic data before making each decision, it is entirely unknown what conclusion it will reach in March.
Whatever happens with the Fed throughout 2016, let's hope it leads to higher returns by the time a 1-year CD bought now matures next February.