What is interesting that even healthy banks are deciding to follow the rate cap. I guess they figure if the FDIC thinks that is a “good” level they might as well fall in place. Many are even offering lower rates. We have even heard of some pressure from bank examiners telling banks, healthy or not, that they shouldn’t be paying rates higher than the cap.

Honestly, when the law was passed I didn’t really see this as the outcome. I thought it might make it harder for the unhealthy banks to raise deposits and thus decrease potential losses if the bank fails. I see the opposite happening. With many healthy banks posting lower rates, the unhealthy banks are still able to easily bring in deposits.

Regardless it is very frustrating to see the government stepping in so strongly to basically regulate the rates that banks pay. It is also interesting to note that although banks haven’t strayed too far from the posted CD rates, many are still out there with high yield savings and checking account specials.

Another interesting development is to see banks work around the caps with creative penalties. For instance we have seen a couple of banks offer 2-Year rates with a zero penalty after 1-year. That effectively allows them to use the higher 2-year rate for a 1-year CD. Also goes to show you that creativity can “trump” governmental restrictions. Also goes to show you that governmental restrictions are rarely thought out well enough and often have the opposite effect of what was hoped or intended.

Two good notes. Credit Unions are not regulated by the FDIC and thus have no rate cap. There are still a few out there posting 2% or above for 1-year CDs. Secondly, there is a bank with a 2Y at 2.53% APY with a 1x bump and a 3Y at 2.79% APY with a 2x bump. Shoot a message and use the magic words, “Awesome Rates” and I’ll give you a 20% discount from our normal fee.

[Update 3/11/10: The 2Y bump rate dropped to 1.88% and the 3Y dropped to 2.21%. At this point a 5-year with a low closure penalty may be the best option]

Have a great weekend.
cd :O)

[Updated: 9/30/09] America’s Credit Union is federally insured by the NCUA. They have a 7-month CD at 2.00% APY, 13-month at 2.15% APY, and a 25-month at 2.50%. Those are really good for this time. They do require $50 to be put into a savings account.

The credit union is federally insured by the NCUA. Currently up to $250,000 through 12/31/13. They have about $344MM in assets and a healthy 7.91% capital ratio. They had a $1.9MM profit for through 6/09. The ratings we use give them 4-stars.

Here is their site.

I hope you find the rates helpful. Leave a comment on your experiences.

You can also view Highest CD Rates for other current rates.
cd :O)