CD Rates Increasing – More 5.00% CDs

The number of certificates of deposit with yields of 5.00% or more has increased.

The same high-yield certificates that were reported at Capital One are still available. The 60 month CD (5 Year) earns 5.00% annual percentage yield (apy), the 84 Month CD (7-Year) and 120 Months (10-Year) both earn 5.30% apy. The minimum deposit to open these CDs is $5,000.

If you are looking to deposit $100,000 or more, Capital One offers Jumbo Certificates with 5.00% apy on the 4-Year CD and 5.25% apy on the 5-Year CD. The 84 Month CD (7-Year) and 120 Months (10-Year) Jumbo Certificates earn the same as the regular CD, which is 5.30% apy.

Discover Bank has offered a great rate on its 5-Year CD since the beginning of July. With a minimum deposit of $2,500, their 5-Year CD earns 5.12% apy.

E-LOAN has kept rates on the 5-Year and 6-Year Certificate of Deposit steady and high at 5.01% apy for the 5-Year CD and 5.10% apy for the 6-Year CD. Minimum deposit to open is $10,000.

For those with $100,000 or more, E-LOAN has boosted the rate on the 5- and 6-Year Jumbo Certificates. Both Jumbo terms earn a super sized rate of 5.25% apy.

GMAC Bank added a 5.00% yield to their lineup at the end of June, then increased the rate on July 18. The rate on the 5-Year CD now earns 5.05% apy with a minimum balance of $500.

Finally, Third Federal Savings & Loan offers 5.00% annual percentage yield on both the 5-Year (60-Month) and 6-Year (72-Month) CD. Minimum deposit to open the CDs are $500.

Low Interest Rates Can’t Keep Up With Inflation

With a federal funds rate at 2.25 percent, the lowest since 2005, investors are faced with receiving interest on their short-term investments that may not even outpace inflation. This presents a pitfall for investors who may be tempted to take on riskier investments or longer-term investments to make up for lost yield.

It is important to remember that the Fed reiterated during its meeting that “downside risk to growth remains,” suggesting that they may be forced to cut rates further. While we may be nearing the bottom, low interest rates for extended periods of time tend to create an environment of higher inflation which would eventually force the Fed to ratchet interest rates back up.

Because of this, investors should resist the temptation to lock up low interest rates for long periods of time, instead focusing on maintaining the flexibility and liquidity to react to the changing economic environment.