Local deals dominate 2-year CD rates this spring

Piggy bank in dollar bills

The best returns on 2-year CDs can be found at local community banks and credit unions after nationally available returns took a tumble in early 2015.

Millstream Area Credit Union, for example is offering Ohio savers 2.269% APY with a $1,000 minimum deposit.

That's nearly a full percentage point more than you'll get from the best national deals.

You'll also find Gulf Coast Federal Credit Union in Texas and Transit Employees Federal Credit Union in Washington, D.C., offering their members 1.55% APY with $500 minimums, or about one-fifth of a percentage point more than the best national deals.

That wasn't the case when the year began.

Citizens State Bank had offered 1.55% APY to all savers since early fall. But the small Florida bank limited CD sales to local customers in January, and now the best national yield is 1.35% APY (more on that later).

While it's true that the best local deals are only available to savers who live and work in a limited area or specific industry, they're far more generous than the best nationally available deals right now.

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 2-YEAR CD RATES: Local Deals

Bank/Credit Union (APY) State Contact
Millstream Area Credit Union 2.269% Ohio millstreamcu.com
Gulf Coast Federal Credit Union 1.55% Texas www.ccgcfcu.com/
Transit Employees Federal Credit Union 1.55% Washington, D.C. www.tefcu.org
LOMTO Federal Credit Union 1.45% New York www.lomto.org
TEXAR Federal Credit Union 1.40% Texas, Arkansas www.gotexar.com
Crescent Bank 1.36% Louisiana www.cbtno.com
GPO Federal Credit Union 1.36% Washington, D.C. www.gpofcu.com/

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

While the highest return is one-fifth of a percentage point lower than it was at the beginning of the year, it's still higher than savers were able to make last April.

Back then, the highest rate you could earn was 1.26% APY.

Today the best nationally available return is 1.35% APY, available from Barclays, CIT Bank and Synchrony Bank with no minimum from Barclays and $25,000 and $2,000 minimums from CIT and Synchrony, respectively.

TOP 2-YEAR CD RATES: Nationally Available Bank Deals

Bank APY Minimum Deposit
Barclays 1.35% No minimum
CIT Bank 1.35% $25,000
Synchrony Bank 1.35% $2,000
BAC Florida 1.31% $500
CalFirst 1.30% $5,000
GE Capital 1.30% $500
iGOBanking 1.30% $1,000
Nationwide 1.30% $500
Ally Bank 1.29% No minimum
First Internet Bank of Indiana 1.26% $1,000
VirtualBank 1.26% $10,000

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 2-YEAR CD RATES: About The Banks

Bank Description URL
Barclays The online American operation of the worldwide British bank with more than $2 trillion in assets. www.banking.barclaysus.com
CIT Bank The online consumer bank of CIT Group Inc., which offers financing to small businesses and middle-market companies. www.bankoncit.com
Synchrony Bank Formerly known as GE Capital Retail Bank, this predominately online bank is being spun off by General Electric and has a single branch in Bridgewater, New Jersey. www.myoptimizerplus.com
BAC Florida 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
GE Capital Bank Another online bank that's a subsidiary of GE Capital, the financial services unit of the manufacturing giant. gecapitalbank.com
iGOBanking An online bank based in Charlotte, North Carolina. www.igobanking.com/rates.aspx
Nationwide An online bank owned by Nationwide Mutual Insurance. www.nationwide.com
Ally Bank An online bank based in Charlotte, North Carolina. www.ally.com
First Internet Bank of Indiana An online bank located in Indianapolis, Indiana. www.firstib.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

The national average return on 2-year CDs is still well below 1% APY — 0.43% APY in our most recent survey

Over the past several decades, savers could usually count on earning something like 4% or 5% on a 2-year CD.

But to rescue the economy from its worst crisis since the Great Depression, the Federal Reserve drove short-term lending (and therefore savings) rates to record lows.

It did that by drastically reducing what's called the federal funds rate — the interest commercial banks are charged 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 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 0.700 in February.

In late 2008, before the Feds lowered the federal funds rate to zero, it was almost 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 December.

A recent 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.

Contributing editor Sabrina Karl provided research for this report.