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Consumer CD use, told in 3 charts

By Allison Ross ·
Tuesday, May 27, 2014
Posted: 5 pm ET

It's no secret that certificates of deposit have become about as popular as Jerry (or is it Gary or Larry now?) from the show "Parks and Recreation."

And for good reason. CD rates have been spiraling downward since the Federal Reserve dropped short-term interest rates close to zero several years ago.

Consumers' views of CDs have fluctuated in the past decade, says Dan Geller, executive vice president of Market Rates Insight.

Geller, who studies CDs and CD rates, shared a few charts that help illustrate what's been going on in the CD market in the past decade. These charts are a simple storyboard to understand how yields and consumer attitudes have affected CD rates.

In the past decade

Data from December 2003 to December 2013 show that deposits in CDs have actually gone up significantly in the past decade, Geller says. But inflation in that decade means that while "the number of dollars in CD accounts grew, the buying power stayed the same," Geller says.

"Consumers are pretty much exactly as they were 10 years ago with CD balances," Geller says.

Geller is looking at all CD deposits in this analysis, rather than the purchasing power of a particular person who has invested in CDs. Bankrate has written about inflation and CD rates for individual consumers. For more information on how today's low CD rates may make them a poor way to fight inflation, see Bankrate's blog "Inflation will eat your CD."

Since the recession

The second snapshot Geller shares is that of the past six years -- since the recession began. As the chart shows, people were worried about the recession and began moving balances from short-term CDs to mid- and long-term CDs.

"We all knew we were going into a recession," Geller says. "Rates of long-term and mid-term CDs were still relatively high. ... People wanted to lock in money as long as they could at the current rates."

Deposits in 2013

The last snapshot Geller shares is that of the past year.

Persistently low CD rates made many people decide that there's no point leaving money in CDs anymore, Geller says. Long-term CDs suffered the most.

"People decide that there's no point locking money in for three, four, five years if the marginal yield is negligible," Geller says, adding that until rates improve, people will be leery of locking up their money for multiple years.

Did your CD investments mimic these charts?

Are you considering a CD? Use Bankrate's CD rate calculator to decide if one is right for you.

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1 Comment
June 01, 2014 at 10:31 am

My experience mirrors the charts somewhat. I used to park money I knew I wouldn't need immediately in 18-month CDs, when the interest rates were 3-5% throughout the stretch of the 2000s. Back in 2007, I decided to move the cash into my retirement funds and regular savings. Not too long after the economy went down and CD rates cratered. I've looked at CD rates since 2008, and the offers aren't worth locking up a portion of my savings (large or small) for any period of time.