People who invest in certificates of deposit won’t appreciate this latest Fed rate cut.

When the Fed lowers interest rates, institutions need to make up for the money they lose as they lower interest rates on mortgages, car loans and the like. One way to do that is to cut the interest paid on deposits, such as CDs and money market accounts.

The national average yield on a one-year CD was 1.68 percent on Nov. 7. On a five-year CD, the yield was 3.39 percent.

On the shorter end, the average yield on a three-month CD was 1.40 percent and 1.50 percent on the six-month. Money market accounts are yielding 0.95 percent. Expect all those yields to fall, with the shortest term CDs falling the most.

Best moves to make:
Until the Fed starts hiking interest rates, rates on deposit products will continue to fall, or stagnate at best, particularly following the Fed’s latest big cut.

If you have a laddered CD plan, stick with it. If a rung is coming due, replace it with the proper maturity. If you have a five-year ladder that was started a couple years ago, you have some CDs earning a fairly decent return in comparison to what’s available today.

If your five-year rung is maturing, you may want to shop around and see if another institution is offering a better rate. There’s no law that says you have to keep all the rungs in the same institution.

Check Bankrate.com for the
best CD rates and the
best money market rates across the country.

— Posted: Nov. 6, 2002