If a 9% CD crossed your feed this month, find the deposit limit before you find your account number. It’s $1,000.
Southland Credit Union in Southern California is running a 9% APY nine-month CD for its 90th anniversary. The accepted deposit range is $100 to $1,000, and you have to live, work or worship in Orange or Los Angeles counties to join. Lynchburg Municipal Employees Federal Credit Union in Virginia is offering 6.5% APY on a 78-month CD, $650 to $10,000, membership limited to employees of a specific list of employers and their families.
Those are the two highest advertised CD rates in the country right now, according to Money’s August 3 rate roundup. They are also coupons wearing a rate’s clothing.
Run the math on the 9%. A thousand dollars at 9% APY for nine months earns about $67. That’s the whole prize. Compare it to the most boring line on the same list: Clearpath Federal Credit Union pays 4.5% APY for 13 months, nationally available, $5,000 minimum, membership open to anyone who makes a $5 donation. Five thousand dollars at 4.5% for 13 months earns about $244.
The loud rate on capped money pays you a quarter of what the quiet rate on real money pays. Here’s what they don’t tell you in the headline: a promotional APY is priced to be cheap for the institution. If it were meant to be lucrative for you, there wouldn’t be a ceiling on it.
Now the part actually worth your attention. CD rates are drifting up, not down.
CD Valet, which tracks about 40,000 CD rates, puts the median CD at 3.25%, up 0.9 percentage points in six months. Banks and credit unions raised yields on more than 800 CD products in the single week of July 20. That’s not generosity. Inflation came in at 3.5% in June, the fourth straight month above 3%, and a rate hike is back on the table. The Fed held on July 29 by a 9-3 vote, with three members preferring a quarter-point increase, and CME FedWatch odds of a September hike sit near 60%.
Translation: the direction of your next CD renewal is genuinely uncertain, and the banks know it before you do.
So do three things before you open anything. Check the maximum deposit, because that single number decides whether the rate matters. Check the membership requirement, because a rate you can’t legally get is not a rate. Then check the term against what you’d earn nationally: this August, CBS News puts a good rate at 3.95% for three months, 4.40% for one year, and 4.50% for three years.
And don’t reach for the longest term. If the Fed hikes in September, a five-year lock at today’s rate is a five-year mistake. A one-year CD or a short ladder captures the yield and keeps you free to reprice.
One number for scale: the national average savings account still pays 0.38%, per the FDIC. Whatever you do, don’t leave it there. Run your own figure on our savings calculator, then compare accounts at our savings hub.
How Candid Yak makes money. Some of the products we write about pay us if you apply or sign up through our links. That never changes our verdict, our rankings, or the numbers in this article. We call a bad deal a bad deal whether it pays us or not. Some brands shown in our comparison tools are placeholder examples while we finalize partner agreements, and we label them as such.