Interest rates are on the rise from their rock-bottom lows following the last recession, but they’re nowhere near great.
That makes figuring out where to park your cash a hard decision.
One product that might be able to provide a higher rate than a savings account with the same kind of safety and guaranteed return is a 5-year CD.
The best 5-year CD rates available from banks and credit unions pay more than two times the national average of 0.91 percent APY, according to Bankrate’s most recent national survey of banks and thrifts.
Today’s top nationally available 5-year CDs pay 2.6 percent APY. This may be a good place to invest money for long-term financial obligations, like your child’s college tuition.
Savers looking for the best CD rates probably want to venture online. Even if a bank is relatively small or not well-known, as long as it’s a member of the Federal Deposit Insurance Corp., you can rest easy knowing your deposits will be returned. The same goes for credit unions backed by the National Credit Union Administration.
One thing to look for, though: ease of use. Banks that make it difficult or time-consuming to deposit and withdraw funds may waste so much of your time that it outweighs the benefit of a few extra basis points of interest on your savings.
Here are the top nationally available 5-year CD rates. Compare these offers, then calculate how much interest you would earn when your CD matures.
|Mountain America Credit Union||2.60%||$500|
|First Internet Bank of Indiana||2.30%||$1,000|
With a 5-year CD, savers earn a premium in addition to the normal risk-free rate they get on a conventional savings account. The catch, of course, is that you’ll pay a penalty if you try to withdraw your money.
But assuming you can find a CD with a low penalty of just a few months’ interest, higher interest rates offered on 5-year CDs may make them a good pick over shorter maturities, even if you think you might need to cash in the CD early.