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CD balances reach 17-year low

By Claes Bell ·
Monday, November 28, 2011
Posted: 3 pm ET

The amount of money held in CDs continued to dwindle this month to the lowest point since 1994, likely because of savers' reluctance to lock their money in at today's rock-bottom CD rates.

Overall, according to the Federal Reserve, CD accounts held $770 billion as of Nov. 14. Compare that to the $1.2 trillion in CDs the Fed counted two years ago, and the decline looks positively precipitous.

It's no wonder savers are staying away. Using the "rule of 72," at the current one-year average CD rate of .35 percent, it would take 205 years to double your money, and 61 years at the current five-year CD rate of 1.18 percent.

What's interesting is that even as CD deposits have taken a nosedive, savings account deposits have reached an all-time high this month, breaking $6 trillion for the first time ever.

That may reflect some wishful thinking. I think there are a lot of savers out there keeping their money in a holding pattern to await higher CD rates in the future. That may have made sense a year ago when it looked like an economic recovery and higher rates could be in the cards.

But with Federal Reserve Chairman Ben Bernanke committing to keep interest rates as low as possible until at least 2013, holding a bunch of cash in savings accounts that are paying even less in interest, on average, than CDs may be pretty pointless.

What do you think? Why are savers abandoning CDs? Do you think that's wise?

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December 03, 2011 at 4:02 am

In uncertain times, for those worried about protecting principle, I Series Bonds, Raise Your Rate CD's, and No Penalty CD's are probablly going to be your best options. DON'T LOCK INTO A CD OR ANY OTHER SIMILAR DEBT HOLDING OVER 3 YEARS WITHOUT ONE OF THE THREE OPTIONS ABOVE:, inflation protection, option to "refinance" or pull it out with none or very minimal penalty. Way better options for savers compared to savings or mma's.

November 30, 2011 at 2:01 pm

The rates are higher at credit unions. And the one I belong to occasionally runs specials. It's not as great as the good ol' days but it's definitely better than doing absolutely nothing in this economy. CD laddering is also an option. Once I build a decent enough cusion in savings, I plan to start one.

Gold Miner
November 29, 2011 at 2:50 pm

Guess I really lucked out - I've got two CD's, one that I renewed 08/18/2008 for five years @ 5.12% (5.25% APY), and another five-year I opened in February 2011 @ 2.96% (3.00% APY). In addition, my 401(K) plan has over $310K + and it's growing. Both my CD's combined have almost $229.5K. Once my first CD matures in August 2013, I may need to look at alternative investment options. Maybe a fixed-indexed annuity will work at that time. Not all too certain (nor comfortable) with municipal bonds, (or at least not at this time).

November 29, 2011 at 8:37 am

Why anyone would open a CD NOW is beyond me.

Fine, you opened it 5 years ago and it was over 4% at the time, congratulations... but you're not getting that ANY time soon. Find other places to put your money in... a CD is NOT it.

November 29, 2011 at 12:38 am

Keep em' short!!