What's crushing CD rates?

CD rates in today's economy
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What do Middle Eastern dictators, real estate agents and CD investors have in common?

The last few years have been extraordinarily tough on all three.

Ever since the economy began to sink into the Great Recession, investors in certificates of deposit have suffered through some of the worst yields in modern history.

Why are banks offering such unappealing CD rates right now?

The numbers tell the story.

Average one-year CD yield
September 20073.76 percent
July 20110.44 percent
Source: weekly survey

Part of a CD's rate is determined by its individual terms, that is, the minimum to open, its early withdrawal penalty and term. Generally, the tighter your money is locked up, the higher the rate you'll get, says Keith Leggett, senior economist for the American Bankers Association in Washington, D.C.

But those terms haven't changed much since 2007. The truth is, conditions in the wider economy have a much more profound effect. Here are the biggest factors that place crushing pressure on CD rates and what has to change for investors to experience a rate renaissance.




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