Top 5-year CD rates roll clock back to 2011
It's been a bounce-back year for 5-year CDs.
When rates bottomed out early last summer, the best nationally available deal paid a paltry 1.75% APY.
Savers were despondent. And understandably so.
But a slow and steady recovery that began last July has pushed the best national returns back to 2.31% APY in April — and 2.30% APY today.
That's more than we've been able to earn on these popular certificates of deposit since September 2011. Yeah, nearly three years.
We keep hoping this will trigger a similar rebound in shorter-term rates. So far, however, this phenomenon has been limited to 5-year CDs.
The half-point rise in nationally available returns has also resulted in fewer community banks and credit unions trying to beat those deals.
Local specials on 5-year CDs have practically disappeared.
That means most of us looking for the best possible rate will have to stash our cash in Synchrony Bank or EverBank — the two banks paying savers in all 50 states 2.30% APY.
Here's how all of the national deals paying 2% APY or more on 5-year certificates of deposit stack up.
TOP 5-YEAR CD RATES: Nationally Available Bank Deals
|GE Capital Bank||2.25%||$500|
|State Farm Bank||2.10%||$500|
|State Bank of India-New York||2.05%||$5,000|
|Salem Five Direct||2.00%||$10,000|
To qualify for this list, a bank must be FDIC-insured and 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 5-YEAR CD RATES: About The Banks
|Synchrony Bank||Formerly known as GE Capital Retail Bank, this predominately online bank has a single branch in Bridgewater, N.J. The huge manufacturer General Electric plans to end its ownership of this bank through a future stock offering.||www.myoptimizerplus.com/|
|EverBank||Primarily an online bank with 14 branches in Florida.||www.everbank.com|
|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|
|GE Capital Bank||One of two online banks, each with its own FDIC insurance, that are subsidiaries of GE Capital Corp., the financial services unit of the manufacturing giant.||gecapitalbank.com|
|Sallie Mae||An online bank owned by the student lender.||www.salliemae.com|
|State Farm Bank||The online bank of the insurance company.||www.statefarm.com|
|State Bank of India-New York||The FDIC-insured New York branch of India's largest bank, which operates independently of other U.S. branches.||www.statebank.com|
|CSBdirect||The online division of Citizens State Bank, which has four branches in Florida.||www.csbdirect.com|
|Salem Five Direct||The online division of Salem 5 Bank, which has 23 branches just north of Boston.||www.salemfivedirect.com|
|BBVA Compass||A major regional bank with 688 branches in the Sun Belt region.||www.bbvacompass.com|
Community banks and credit unions have shifted most of their deals to 2- and 3-year CDs.
Take, for example, Patriot Federal Credit Union in Chambersburg, Pa.
Last month, it ended a special that paid savers in south-central Pennsylvania and northern Maryland a surprising 3.0% on 60-month CDs with a $25,000 minimum deposit.
Now the special is on 29-month CDs and the return for 60-month CDs has been cut to no more than 2.00% APY with a whopping $250,000 minimum deposit.
The best local deal is way out on the eastern end of Long Island, where Montuak Credit Union is paying its members 2.5% APY.
It's interesting to note that this rebound in leading rates is not reflected in the average return on 5-year CDs.
It was 0.78% APY last July and 0.79% APY this July.
Nor has it been caused by any direct action that the Federal Reserve has taken.
The government-controlled bank has driven short-term interest rates to record lows by drastically reducing what's called the federal funds rate, which is what commercial banks pay to borrow money from each other through the Fed.
That rate has been essentially zero since December 2008, so why would a bank pay savers for deposits when it can get pretty much all of the money it needs from the Fed essentially for free?
But the bank is widely expected to begin raising the federal funds rate sometime next year.
We suspect some forward-thinking banks are offering slightly better returns now in an effort to lock up as much money as they can before the Fed begins pushing rates substantially higher in 2015 and 2016.
We can only hope that trend gathers steam during last six months of 2014. After five years of earning practically nothing on their bank accounts, savers deserve a return to reasonable rates as soon as possible.
Contributing editor Darci Swisher contributed to this report.
Follow Mitch Strohm on Google Plus.