Top national 6-month CD rates hit 3 1/2-year high

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After months of stagnant returns, a new leader has emerged in 6-month CDs, and it's offering a rate we haven't seen since September 2011. That's right — in over three-and-a-half years.

MySavingsDirect is paying 1.05% with a $1,000 minimum deposit.

That pushed the online operation of New York's Emigrant Bank past previous leader California First National Bank, even though it also boosted its return from 0.85% APY to 0.95% APY.

Although a few national deals briefly paid as much as 1.00% APY during that time, the top yields mostly bounced between 0.80% APY and 0.93% APY.

While it's far too early to declare any sort of trend in short-term CD rates, this modest uptick couldn't come at a better time.

Many savvy savers are looking for a place to park their money while waiting for the Federal Reserve to start pushing interest rates higher this summer or fall. (More on that later.)

TOP 6-MONTH CD RATES: Nationally Available Deals

Bank APY Minimum Deposit
MySavingsDirect 1.05% $1,000
CalFirst 0.95% $5,000
BAC Florida 0.80% $5,000
EH National 0.80% $10,000
Silvergate 0.75% $25,000
Colorado Federal Bank 0.70% $5,000
First Internet Bank of Indiana 0.70% $1,000
GE Capital 0.70% $500
Giant 0.70% $2,500
AloStar 0.65% $1,000
Discover Bank 0.65% $2,500
Virtual Bank 0.65% $10,000
UmbrellaBank 0.61% $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 6-MONTH CD RATES: About The Banks

Bank Description URL
MySavingsDirect An online division of Emigrant Bank, which has two New York-area branches, one in Manhattan and the other in suburban Ossining.
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.
BAC Florida Bank A community bank with one location in Coral Gables that sells its products nationally through My e-BAnC.
EH National Bank Which has a single branch in Beverly Hills, California.
Silvergate Which has four branches in Southern California and is a subsidiary of Silvergate Capital Corp.
Colorado Federal Savings Bank An online bank based in Greenwood Village, Colorado.
First Internet Bank of Indiana An online bank located in Indianapolis.
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.
Giant Bank The online division of Landmark Bank, which has six branches in Broward County, Florida.
AloStar Bank of Commerce An online bank based in Birmingham, Alabama, formerly known as Nexity Bank.
Discover Bank An online bank owned by the credit card company.
Virtual Bank The online division of Sabadell United Bank, which has 23 branches in Florida and is owned by Banco Sabadell, Spain's fourth-largest bank.
UnbrellaBank The online division of Beal Bank, which operates 16 branches in 10 states.

We aren't finding as many local deals on 6-month CDs this spring, but it never hurts to see what nearby community banks and credit unions have to offer.

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

NUVO Bank & Trust, for instance, is offering customers in Massachusetts and Connecticut 1.26% with a $1,000 minimum deposit.

That's over one-fifth of a percentage point higher than our top national deal.

LOMTO Federal Credit Union is offering its New York City members 1.10% APY.

Even that is well below the average return of 2% to 3% savers could count on before the financial crisis struck in 2008.

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 for loans through the Fed for practically nothing.

That meant the banks really didn't need our deposits, allowing them to slash the return on CDs, savings and money market accounts.

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 and still sits at only 0.687% in March.

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

Savers responded by reducing the amount they invested in CDs from $1.45 trillion at the end of 2008 to less than $500 billion today.

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 now the nation's bank-for-banks has dropped both phrases from its policy guidance and could start raising the federal funds rate as early as June, although later this year seems more likely.

The most recent official 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.