The Death of the Certificate of Deposit: Will CD Rates Ever Rebound? :: Wamhoff Financial & Accounting

The Death of the Certificate of Deposit: Will CD Rates Ever Rebound?

by: Cherrie Boyer

1 “Certificates of deposit, commonly known as CDs, were considered a goldmine by our parents and grandparents for the alluring CD rates once offered. Since their time, however, interest rates on CDs and other deposit accounts have caused the hype around CDs to almost seem like an old wives’ tale.

However, the CD rates of yesteryear were no myth, as they put today’s puny average rate of 0.50 percent APY (for a 6-month CD) to shame.

As far as deposit accounts go, a certificate of deposit was once regarded as just about the best investment for your money. Also known as a time-deposit account, the balance on a CD remains on deposit for a fixed term—often, terms are set at 6 months, 1 year, 2 years, or 5 years, but CD terms vary by institution.

The major appeal of CDs is usually their high-yield opportunities and their low-risk nature as an investment. While these two positive aspects of CDs may have been relevant in years past, current CD rates no longer reign as having the best gains around.

Americans quickly recognized the interest earning potential of CD rates, especially at its height in the late-70s and early-80s.

According to, a 6-month CD generated an average rate of return of as much as 17.98 percent APY in August 1981. Certificates of deposit, particularly long-term CDs, received acclaim for their unprecedented interest rates that rivaled the competitiveness of other high-risk savings and investment ventures.

These numbers, however, have died down considerably as 6-month CDs have fallen from grace, settling below 1 percent since 2009.

The fact is that interest rates are never going to remain at a constant upward climb, because interest rates are heavily influenced by economic conditions like unemployment and are also guided by the Federal Reserve.”

1. The article was written by Jennifer Colonia and reported online May 23, 2012 by U.S. News & World Report (

There are many alternatives to CD’s low rates. You could take advantage of the long-term potential of the stock market while diminishing the impact of short-term stock market swings, investors can spread their investing dollars among several different types of investments. Rather than being forced to choose between very safe investments and extremely risky ones, investors have a smorgasbord of options in between the two poles.

It does not cost you anything to come in and talk to a planner to discuss what those options are. Call (636)573-1212