Top 12-month CD rates stumble in early 2015

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The best nationally available 12-month CDs are starting out the year lower than they were at the end of 2014.

Citizens State Bank had led our rankings since fall, paying savers across the country 1.25% APY.

But it cut its rates this month, and now the best you'll earn on a national deal is 1.17% APY (more on that later).

That makes it more likely that a community bank or credit union 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 far more generous than the best nationally available deals.

For instance, Pioneer Valley Federal Credit Union in Massachusetts is offering members 2.10% APY with a $1,000 minimum. That's a better rate 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.

In many cases, those accounts must be opened in person, but the rates are well worth the trip.

Here are some 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
Gulf Coast Federal Credit Union 1.30% Texas www.ccgcfcu.com
HAB Bank 1.30% 1.30% in California, pays 1.25% in New Jersey and New York www.habibamericanbank.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 a little lower than it was just a few weeks ago, it's still higher than savers were able to bank on last January.

A year ago, the top national yield was 1.10% for the entire month.

Today, the best nationally available return is 1.17% APY available from BankDirect with a $10,000 minimum deposit.

TOP 1-YEAR CD RATES: Nationally Available Bank Deals

Bank APY Minimum Deposit
BankDirect 1.17% $10,000
BAC Florida 1.15% $5,000
Sallie Mae 1.15% $2,500
CIT Bank 1.15% $25,000
Synchrony Bank 1.15% $25,000
Nationwide Bank 1.14% $500
GE Capital 1.10% $500
Colorado Federal 1.10% $5,000
CalFirst 1.10% $5,000
AloStar 1.10% $1,000

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
BAC Florida Bank A community bank with one location in Coral Gables that sells its products nationally through My e-BAnC. www.bacflorida.com
Sallie Mae An online bank owned by the student lender. www.salliemae.com
CIT Bank The online consumer bank of CIT Group Inc., which offers financing to small and midsize companies. www.bankoncit.com
Synchrony Bank A predominately online with a single branch in Bridgewater, New Jersey.
Nationwide Bank An online bank owned by Nationwide Mutual Insurance Co. www.nationwide.com
GE Capital An online bank owned by GE Capital Corp. the financial services unit of the manufacturing company. gecapitalbank.com
Colorado Federal Savings Bank An online bank based in Greenwood Village, Colorado. www.coloradofederalbank.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
AloStar Bank of Commerce An online bank based in Birmingham, Alabama, formerly known as Nexity Bank. retail.alostarbank.com

All of these rates are three or four times higher than the current average of this term, which is 0.28% APY, according to our most recent survey of major banks and thrifts.

But why does it seem returns are trending downward again?

We think it's uncertainty over what the Federal Reserve is going to do.

The Fed 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 dramatically reducing the amount of money they have invested in CDs, from $1.45 trillion dollars in early 2009 to just over $500 billion today.

Six months ago, the economy was finally showing signs of robust growth and all of the statements emanating from the Fed indicated that it would start pushing interest rates higher in 2015.

Higher rates seemed inevitable. Perhaps as early as April. Certainly no later than June or July.

That created some pressure on the banks to begin raising the returns on CDs and savings accounts — or at least not to cut them any further — to attract investors and rebuild their deposit base.

But since then, the economic situation in Europe has deteriorated and another recession is possible, perhaps even a period of deflation — a time when prices are falling that's far more dreaded than runaway inflation.

The chronic problems there will undoubtedly hurt the economy here, and that's weighing heavily on the Fed's rate-setting committee.

Earlier this month, Chicago Fed President Charles Evans, a voting member of that committee, went on CNBC to say he didn’t think rates should be raised until 2016.

The Fed might very well proceed with its plans to start pushing interest rates higher this summer.

But that seems a lot less inevitable than it did last fall, and the banks seem to be pausing, and perhaps even scaling back, any plans to raise rates until they can figure out what the Fed intends to do.

They'll be watching for any clues after the rate-setting committee holds it first meeting of the year next week.

Contributing editor Darci Swisher contributed to this report.