Top 12-month CD rates rise then fall in early 2015

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For one brief and shining moment last month, the top nationally available CD rate was at a three-and-a-half year high.

In February, iGOBanking boosted its 12-month return to 1.30% APY — a yield we hadn't seen since July 2011.

Unfortunately, the deal was short-lived. After just 10 days, the bank slashed its rate to a dismal 0.15% APY.

Now the top national rate is from BankDirect — 1.21% APY, with a hefty $10,000 minimum deposit, a deal it's been offering since mid-February.

That means there’s a better chance that a community bank or credit union near you is offering a better return on 1-year CDs.

It's true that these rates are only available to savers who live and work in a limited area or specific industry, but they're well worth searching out.

Pioneer Valley Federal Credit Union, for example, is paying Massachusetts savers 2.10% APY with a $1,000 minimum. That's a better yield than what you'll find from the best local and national 36-month CD deals.

You'll also find that General Electric Credit Union is offering members in Ohio, Kentucky and Indiana 1.50% APY. But that's with hefty $100,000 minimum.

Here are some more examples of the best local deals currently being offered.

TOP 1-YEAR CD RATES: Local Deals

Bank/Credit Union (APY) State Contact
Pioneer Valley Federal Credit Union 2.10% Massachusetts www.pioneervalley.coop
General Electric Credit Union 1.50% Ohio, Kentucky, Indiana www.gecreditunion.org
Crescent Bank 1.31% Louisiana www.cbtno.com/
LOMTO Federal Credit Union 1.25% New York www.lomto.org

If you can't find a similar offer where you live, then the best national deals are your best bet.

While the top return is lower than you would have been able to earn for a short stint last month, it's still higher than savers were able to bank on last March.

A year ago, the top national 1-year CD yield was 1.05% APY for the entire month.

TOP 1-YEAR CD RATES: Nationally Available Bank Deals

Bank APY Minimum Deposit
BankDirect 1.21% $10,000
CIT Bank 1.20% $1,000
Synchrony Bank 1.20% $25,000
BAC Florida 1.18% $500
CalFirst 1.16% $5,000
VirtualBank 1.16% $10,000
Nationwide Bank 1.15% $500
Sallie Mae 1.15% $2,500
AloStar 1.10% $1,000
Colorado Federal 1.10% $5,000
GE Capital 1.10% $500

To qualify for this list, a bank must allow savers from all 50 states to buy its certificates of deposit online or through the mail.

Our CD calculator will help you figure out the interest you'll earn, for any term, amount and interest rate.

TOP 1-YEAR CD RATES: About The Banks

Bank Description URL
BankDirect The online division of Texas Capital Bank, which has 12 locations in Texas. www.bankdirect.com
CIT Bank The online consumer bank of CIT Group Inc., which offers financing to small and midsize companies. www.bankoncit.com
Synchrony Bank Formerly known as GE Capital Retail Bank, this predominately online bank has a single branch in Bridgewater, New Jersey. www.myoptimizerplus.com
BAC Florida Bank A community bank with one location in Coral Gables that sells its products nationally through My e-BAnC. www.bacflorida.com
California First National Bank An online bank owned by the same company that runs California First Leasing Corp., which finances all sorts of high-tech business equipment. www.calfirst.com
VirtualBank The online division of Sabadell United Bank, which has 23 branches in Florida, and is owned by Banco Sabadell, Spain's fourth-largest bank. www.virtualbank.com
Nationwide Bank An online bank owned by Columbus, Ohio-based Nationwide Mutual Insurance. www.nationwide.com
Sallie Mae An online bank owned by the student lender. www.salliemae.com
AloStar Bank of Commerce An online bank based in Birmingham, Alabama, formerly known as Nexity Bank. retail.alostarbank.com
Colorado Federal Savings Bank An online bank based in Greenwood Village, Colorado. www.coloradofederalbank.com
GE Capital An online bank owned by GE Capital Corp. the financial services unit of the manufacturing company. gecapitalbank.com

All of these rates are at least four times higher than the current average of this term, which is 0.27% APY, according to our most recent survey of major banks and thrifts.

And while that national average on 1-year CDs may be dismal, it appears as though average returns could be moving up relatively soon across all terms.

The Federal Reserve has driven short-term interest rates to record lows by drastically reducing what's called the federal funds rate. That's what commercial banks pay to borrow money from each other through the Fed.

Since it's been essentially zero since December 2008, banks have been able to get pretty much all of the money they need for loans through the Fed for essentially nothing.

When the banks didn't need our deposits, they slashed rates, and savers responded by yanking money out of CDs, with those deposits falling $1.45 trillion in early 2009 to just over $500 billion today.

One measure of how little savers are being paid is the Cost of Funds Index compiled by the Federal Home Loan Bank of San Francisco. It asks banks in California, Arizona and Nevada how much they're actually paying for deposits.

The index hit a record low of 0.663% in September, before rebounding slightly the last three months. It still sat at only 0.692 in December.

Back in 2008, before the Feds lowered the federal funds rate to zero, it was four times higher — 2.757%.

Over the past six years, the Fed’s rate-setting committee regularly issued statements saying it expected to keep interest rates near zero for “a considerable time,” or more recently, that it would be "patient" about raising rates.

But this year the nation's bank-for-banks has dropped both phrases from its policy guidance.

Now almost everyone expects the Fed will finally start pushing rates higher as early as June, and no later than this October.

A new survey of the 17 Fed governors shows they expect the federal funds rate to be just below 1% by the end of this year, just below 2% by the end of 2016, and to reach their ultimate target of 3.75% sometime in 2018.

That will be a wonderful change for savers who have endured artificially low returns for so long.

Anyone who buys a 1-year CD now will almost certainly be able to move their money into a more lucrative CD when it matures next winter.

Contributing editor Sabrina Karl provided research for this report.