CD rates Blog

Finance Blogs » CD rates Blog » CD rates: Then and now

CD rates: Then and now

By Sheyna Steiner ·
Wednesday, February 6, 2013
Posted: 4 pm ET

Maybe I'm crazy, but looking at historical rates on certificates of deposit gives me the same vicarious thrill as the food magazines lining the checkout stand at the grocery store.

Both leave me feeling a little dazzled, and I'm only slightly more likely to whip up something on the cover of "Bon Appetit" than I am to find a one-year CD yielding more than 8 percent. Which is to say, neither are going to happen anytime soon. But one of them has happened before.

In October 1983, when Bankrate first started keeping track, the average one-year CD came with a 9.95 percent rate.

Bankrate began tracking the five-year CD rate and yield in 1984. At that time, the average one-year CD came with a dizzying 9.59 percent rate, the average yield was 9.86 percent and the five-year yield was 11.01 percent.

You can see by this chart that CD rates have only gone downhill since the decade that brought us "Knight Rider" and "Garbage Pail Kids." And truthfully … hasn't everything else?

Why were rates so high in the '80s?

CD rates were high 30 years ago for the same reason they're low today -- inflation, specifically the Federal Reserve's perception of inflation. The '80s came along at the tail end of skyrocketing costs between 1965 and 1980. "The annual reported rate of consumer price increase rose from 1.07 percent in January 1965 to 13.70 percent in March 1980, before declining in 1983. Measured inflation only reached its local trough of 1.12 percent in December 1986," Allen Meltzer wrote in a 2005 paper published in the Federal Reserve Bank of St. Louis Review.

As you can imagine, the cost of borrowing was pretty high back then as well. Low CD rates stink for savers -- but at least the federal funds rate isn't 20 percent, as it was briefly in 1980 and 1981.

Did you buy CDs in the '80s? I was busy buying the aforementioned Garbage Pail Kids cards then.

Follow me on Twitter: @SheynaSteiner.

Bankrate wants to hear from you and encourages comments. We ask that you stay on topic, respect other people's opinions, and avoid profanity, offensive statements, and illegal content. Please keep in mind that we reserve the right to (but are not obligated to) edit or delete your comments. Please avoid posting private or confidential information, and also keep in mind that anything you post may be disclosed, published, transmitted or reused.

By submitting a post, you agree to be bound by Bankrate's terms of use. Please refer to Bankrate's privacy policy for more information regarding Bankrate's privacy practices.
Sheyna Steiner
February 07, 2013 at 8:41 am

Thanks for writing William. It is an uncomfortable and untenable situation for many savers.

William M.
February 07, 2013 at 8:31 am

As a senior citizen I lived through the "good years" for CD investors. I believe my peak CD in the eighties paid an unbelieveable 14 plus percent. If I had made that rate, or anywhere near it since, I would be a very wealthy man. Now we have hit the other extreme, a serious blow to senior citizens as most of us are invested in fixed income products.

As we are squeezed by these ridiculously low interest rates, the great Ben Bernanke tells us there is no inflation in America, so rates can be kept historically low Obviously Mr. Bernanke shops at different stores than I do, as every time I do my grocery shopping the prices are up, and I mean on a weekly basis.

I consider this no less than an attack on savers in this country. As the government has seen fit to bail out almost every other segment, they have abandoned the responsible citizens who have lived responsibly within their means.

As I approached retirement I never in my wildest dreams thought that I would earn less than 4-5 percent on my money, which would certainly not make me rich, but would at least make me comfortable. Little did I know that our Government, and Mr. Bernanke in particular, had other ideas. Now, myself, and I'm sure many others live a very frugal life out of necessity brought on by the misguided policies of our Government.