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Low rate CDs are a hard sell

By Sheyna Steiner ·
Thursday, June 21, 2012
Posted: 12 pm ET

Buying a one-year CD sporting a rate under 1 percent can be hard to swallow. The prolonged low-rate environment has caused a sustained drop in income for retired people and those nearing retirement.

It's hard on the other side as well. Rates are so low now that it's actually hard to construct a CD that people will buy, according to a May 31 story on, website devoted to financial risk management news and analysis.

From the story, "Certificates of deposit becoming 'harder than ever to structure:'"

"With rates getting so low, especially in the past month, some CD structures just cannot be produced," says John Tessar, head of structured products at Florida-based distributor JVB Financial.

As a result, CD purchasing has slowed dramatically, says Tessar. "Though simple step-up structures still have some traction, once the initial coupon is lower than 1%, investors' appetite wanes."

According to Bankrate's weekly rate surveys, many CDs have paltry rates often under 1 percent -- in fact this week's interest rate roundup showed that the average yield on a five-year CD barely breaks 1 percent -- it's currently at 1.11 percent.

Do you have a rate threshold at which buying a CD just makes no sense?

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June 25, 2012 at 10:21 am

At 1% I'll keep my money in my pocket.Todays rates are ridiculous.

June 23, 2012 at 1:23 am

CD's are no longer investment tools in this market but still are excellent tools for savings. 1% on a 1 year CD is still way better than letting that money sit in a savings @ .25% for a year