As the economy continues to recover from the pandemic, banks are competing for customers by offering higher CD rates. Certificates of deposit (CDs) are a type of savings account that pays a fixed rate of interest over a set period of time. CDs are a popular choice for savers who want to earn a higher rate of return than a traditional savings account, but don’t want to take on the risk of investing in the stock market.
The average CD rate has been steadily increasing since the start of the pandemic, and is now at its highest level in over a decade. According to Bankrate, the average one-year CD rate is currently 0.45%, while the average five-year CD rate is 1.02%. These rates are significantly higher than the average savings account rate of 0.05%.
Banks are offering higher CD rates in order to attract new customers and retain existing ones. With the Federal Reserve keeping interest rates low, banks are looking for other ways to increase their profits. By offering higher CD rates, banks can attract more deposits, which can then be used to make loans and other investments.
For savers, higher CD rates mean more money in their pockets. CDs are a great way to save for the long-term, as they offer a guaranteed rate of return and are FDIC-insured up to $250,000. However, it’s important to remember that CDs are not without risk. If you need to withdraw your money before the CD matures, you may be subject to an early withdrawal penalty.
If you’re looking for a safe and secure way to save for the future, CDs are a great option. With banks offering higher CD rates, now is a great time to take advantage of this opportunity and start earning more on your savings.
