Top 6-month CD rate remains in retreat this winter

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The best nationally available 6-month CD rates gave up early fall's gains and have declined this winter.

Doral Bank Direct is the still the national leader, paying 0.82% APY with a $500 minimum.

That's quite a bit less than the 1% APY we saw iGObanking pay during four weeks between late September and early October.

But these setbacks are to be expected as we make the transition from six years of deliberately depressed interest rates to rising, more market-driven returns.

"Rates are going up, but it's not necessarily going to be a smooth progression from one new high to the next," says Mike Sante, the managing editor of Interest.com.

"There may be a few steps back in the process, and that's what we're experiencing here," he says.

Fortunately, there are still a few credit unions and community banks offering better returns to local customers.

Two of the best deals in the country can be found in New York, where credit unions are treating their members very well.

LOMTO Federal Credit Union and Bay Ridge Federal Credit Union are paying 1.10% APY and 1.01% APY, respectively.

But you'll have to live in the Big Apple to join these credit unions and qualify for these rates.

There are residency and purchase requirements at the other credit unions paying local savers 1.00% APY in Texas and in Washington, D.C., and at another other credit union paying local savers 0.90% APY in Massachusetts.

TOP 6-MONTH CD RATES: Local Deals

Bank/Credit Union APY State Contact
LOMTO Federal Credit Union 1.10% New York www.lomto.org
Bay Ridge Federal Credit Union 1.01% New York www.brfcu.org
GPO Federal Credit Union 1.00% Washington, D.C. www.gpofcu.com
Gulf Coast Federal Credit Union 1.00% Texas www.ccgcfcu.com
Industrial Credit Union 0.90% Massachusetts www.industrialcu.org

If you can't find a similar deal where you live, then the best nationally available deals, starting with the one from Doral Bank, are your best bet.

Yes, you'll earn a little less. But all of these rates are at least four times more than the average return on 6-month CDs — a paltry 0.16% APY, according to our most recent survey of major banks and thrifts.

TOP 6-MONTH CD RATES: Nationally Available Deals

Bank APY Minimum Deposit
Doral Bank Direct 0.82% $500
EH National 0.80% $10,000
BAC Florida 0.77% $5,000
Giant 0.75% $2,500
GE Capital 0.70% $500
Colorado Federal Bank 0.70% $5,000
ableBanking 0.70% $1,000
First Internet Bank of Indiana 0.70% $1,000
AloStar 0.65% $1,000
Discover Bank 0.65% $2,500
Virtual Bank 0.65% $10,000
Synchrony Bank 0.65% $25,000

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
Doral Bank Direct The online bank of Doral Bank, the leading community bank in Puerto Rico, which also has five branches in northwest Florida and two in New York City. www.doralbankdirect.com
EH National Bank Which has a single branch in Beverly Hills, California. www.ehnbank.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
Giant Bank The online division of Landmark Bank, which has six branches in Broward County, Florida. www.giantbank.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
Colorado Federal Savings Bank An online bank based in Greenwood Village, Colorado. www.coloradofederalbank.com
ableBanking The online division of Northeast Bank, which has 10 branches in Maine. www.ablebanking.com
First Internet Bank of Indiana An online bank located in Indianapolis. www.firstib.com
AloStar Bank of Commerce An online bank based in Birmingham, Alabama, formerly known as Nexity Bank. retail.alostarbank.com
Discover Bank An online bank owned by the credit card company. www.discover.com
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. www.virtualbank.com
Synchrony Bank The other bank that's a subsidiary of GE Capital Corp. www.myoptimizerplus.com

Over the past several decades, savers could usually count on earning something like 2% or 3% on a 6-month CD.

But 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 dramatically reducing the amount of money they have invested in CDs, from just over $1 trillion dollars in 2010 to just over $500 billion today.

With the Fed widely expected to begin raising the federal funds rate sometime in 2015, banks and credit unions are beginning to offer slightly better returns in an effort to corral as much money as they can before deposits become substantially more expensive in 2015 and 2016.

How much more expensive?

A poll of Fed board members shows that they expect the federal funds rate will be between 1% and 2% by the end of 2015 and between 2% and 3% by the end of 2016.

If that turns out to be the case, savers can expect the average return on 6-month CDs to reach something like 1% to 1.5% by the end of 2015 and 2% by the end of 2016.

Contributing editor Darci Swisher contributed to this report.