History of Certificate of Deposit Rates from the 1980s to Today
This article presents the history of certificate of deposit rates over the past four decades. Starting from the 1980s, certificate of deposit rates were relatively high and began to slowly decline to near zero after the Great Recession. In recent years, certificate of deposit rates have started to rise again – but not to the levels we saw in the past.
How Do Certificates of Deposit Work?
A certificate of deposit is a type of savings account that earns a fixed interest rate as long as you don’t touch the money for a specified period of time. Once that specified period ends, you can withdraw your money and the earned interest. If you withdraw it early, you’ll pay an early withdrawal penalty, typically by forfeiting a few months’ worth of interest.
Are Certificates of Deposit a Good Option for Savers?
Certificates of deposit at banks and government-insured credit unions provide a safe place to grow your savings at a fixed interest rate compared to riskier investments like stocks. A certificate of deposit is a great option for storing money that you might want to save for a future goal. Short-term certificates of deposit (those with a term of less than one year) are ideal for cash you plan to use in the next six to 12 months, such as for a vacation, a new car, or a down payment on a home. If you don’t need access to your money for several years, putting cash in a long-term certificate of deposit, such as a three- or five-year CD, can help you earn more interest. Since a certificate of deposit is not as liquid as a regular savings account, it removes some of the temptation to spend the money you’re saving for those bigger goals.
How to Find the Highest Certificate of Deposit Rates?
Comparative shopping is the best way to find the highest return on your money. Reviewing rates from major banks, credit unions, small local banks, and online lenders will give you a comprehensive view of the pricing landscape. You’ll also want to consider other factors such as minimum deposit amounts, fees, customer service, convenience, and terms.
Conclusion
Studying historical certificate of deposit rates over four decades provides insight into how market factors influence the ways Americans manage their savings. Factors affecting the broader economy – from inflation to supply chain delays – require the Federal Reserve to respond with changes in interest rates. These changes, in turn, affect the rates that banks offer on certificates of deposit.
There’s no way to predict how future events will impact the economy, but you can take advantage of a rising rate environment to grow your savings in a product that guarantees a fixed growth rate. Your decisions regarding the term of the certificate should depend on how long you can afford to tie up your money without withdrawing it to avoid early withdrawal penalties. Those decisions should be based on your circumstances and long-term financial goals.
Source: https://www.cnet.com/personal-finance/banking/cds/historical-cd-interest-rates/
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