A very common deposit account product that is used by the public is the certificate of deposit. A certificate of deposit also brings with it FDIC insurance of up to $250,000.00 at this point. Cd’s are generally seen as an attractive option for those who wish to put their money away and earn a yield higher than a savings account. It is important to remember that you should only deposit as much in a cd as you believe you won’t need for that time period, because there are penalties for early withdrawals.

Currently cd rates are extremely low because the Federal Reserve has the Fed Funds rate at virtually zero. The average one year cd is yielding a little less than 1.75% right now. This is definitely not an attractive deposit option with that kind of yield, but considering the health of the overall economy in the past year it isn’t surprising at all that rates are so low. When the Federal Reserve has set interest rates this low there is no way banks can afford to pay the impressive 4 or 5% one year cd rates we were used to seeing before. Even a five year cd, which locks up your money for a very long time only yields on average 2.93% according to Bankrate.com.

A question that many people have during this kind of economic environment is how long should I lock up my cd rate? The two options at this point appear to be either lock in a very long term cd after your compare cd rates at local banks and online. Even if you find the best cd rate out there for a long-term cd it won’t be very impressive at all. The other option is to use money market savings account specials or short-term cd rate specials and hope for better rates in the future.

Should you lock in cd rates now or wait for better rates in the future? The truth is it depends on your outlook on the economy. If you think the economy should improve drastically in the next several months you’ll want to stick to short-term options and wait for better rates. The definite thing about today’s rate environment is that things aren’t pretty, but they also can’t get much worse. The fact that rates can’t get much worse makes me wonder if it really is a wise move to lock up money for long periods of time.

My 9 month CD offers me 2% APR. Just 2%! I guess even 2% is ok in the current 0% environment. My checking account offers less than 0.5%. If you want to have a checking account that offers more than 5%, it’s possible but with some conditions.

For example, Olmsted National Bank offers checking account with 5.01% APY for balances up to $25,000. You need to make minimum 12 debit card purchases per each statement cycle. You also need to sign up for direct deposit. Click here to read more about the offer from Olmsted National. If you don’t meet the bank’s conditions, the APY drops to 1%. I am not sure whether I can make 12 debit card purchases in each statement cycle! If I am desperate to get 5.01% APY, I may go to Safeway every two days to get my milk and groceries and charge the debit card every time!

Connexus Credit Union offers 5.15% APY for balances up to $25,000. They have their own conditions too. You need to use your debit card 15 times each month. 1 bill pay transfer and 1 direct deposit transfer are also essential. If you don’t obey their rules, your APY will go to just o.5%.

If you can play by the rules set by these banks, you can get 5% APY. God, even to get 5%, we need to dance like this. What this world comes to?!

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