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CD balances hit 45-year low

By Claes Bell ·
Tuesday, April 16, 2013
Posted: 4 pm ET

Thanks to historically low CD rates, the market for CDs is in freefall. According to the Federal Reserve, the amount of money sitting in small time deposits, Fed-speak for CDs, is now around $603 billion.

That may seem like a lot, but it's actually the lowest CD balances have been since the third quarter of 1979. When you adjust for inflation, the numbers are even more staggering; in real terms, CD balances are currently sitting at a 45-year low. That's right, CD balances haven't been this low in real terms since the second quarter of 1968, when The Beatles were still a band, gasoline was still leaded and handheld calculators were still cutting-edge technology.

That doesn't mean Americans have given up on savings, however, they're just turning to liquid savings accounts instead. The amount of money sitting in savings rose to $6.753 trillion, enough cash to buy the entire island of Manhattan more than seven times over, and checking account balances are near record highs as well.

It's easy to understand why investors are ditching CDs. The average yield on a five-year CD is now just 0.81 percent. You can find higher CD rates -- the best five-year rate currently on Bankrate's CD rate table is 1.7 percent -- but that's still not much of a payoff for locking your money up for such a long period of time, especially with inflation running at around 2 percent per year.

What do you think? Have you abandoned CDs?

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April 19, 2013 at 8:19 pm

Gee, 5 years ago I thought 5.0% for a a 10 year CD was a bad investment!

April 18, 2013 at 6:43 pm

Yep - dropped CDs like a bad habit when rates went below inflation - who would be content with a slow loss of their buying power?