Investors Take Business Elsewhere Due to Poor CD Rates

Recently the Capital Credit Union was seeking the right opportunity to increase its deposits. This was when it offered 1.11% APY return for an 11-month Certificate of deposit. Before the opportunity ran out, members snatched the available CDs and made the most of it last December.

The wise president of the member service, Capital Credit Union, Jim Schaefbauer said, “It seemed like people would break down doors when we put the rate out there.”

Thirty years ago, a 1-year CD earned about 10% and at that time, mortgage rates were much better. However, in recent years, to get even 1% on a CD on a 1-year term is something no one had heard of. Schaefbauer added that, today, people have to wait three years or more to get close to 1%.

According to the report on CD rates, as reported this week, the average national rate for a 1-yr CD is approximately 0.27%. It doesn’t seem like these interest rates will go up any time soon. To confirm this prediction, the CEO and president of United Savings Credit Union in Dilworth and Fargo, Nick Woodard, said that he couldn’t foresee any hikes in the CD rates until 2015 ends, and even then, there is no guarantee.

The reason for this is that there is enough volatility in the market, and the feds are doing their best to keep the rates low.

These developments can become a problem and challenge for people close to retirement or who are retiring, and people at risk of financial losses. The challenge here is that most people who are retiring need ways to increase their money, and do not have to take the risk to outlive it.

In many ways, CDs can serve as a placeholder for funds that people may not want to invest and risk losing. If the rates are as good as 2-4%, it can be recommendable for people to plan and buy a house within a few months.

However, sadly the current rates are not looking interesting enough to encourage people to add CDs on their investors’ portfolios. This is why investors are investing in other businesses, elsewhere, where they can make reasonable profits.

For those still considering CDs, it would be a better option to ladder CDs instead of putting entire savings into a single CD. This way, investors can get regular money without the need to pay interest penalty.