Top CD Rates Recap - 5 Year CD at 3.5% APY and 3 Year CD at 2.81% APY

Average CD rates showed upward movement this week.

The average 1-year CD rate remained steady at 1.84% APY. The top rate remains at 2% APY but it is now offered by First City Bank. First City is offering a great rate but be sure to stay under FDIC insurance limits - it is rated as 0 stars according to Bauer Financial for its safety and soundness.

The average 3-year CD rate rose by 2 basis points from 2.62% APY to 2.64% APY. The top rate last week was Hudson City Bank with a 2.8% APY CD. That rate remains good but USAA Federal Savings Bank is offering a 2.81% APY 3-year CD. The minimum deposit to get that rate is $175,000. While you need a military connection to quality for their loan and insurance products, you do not need one to take advantage of USAA deposit products. In the banking world, USAA is highly regarded for its banking products and services.

The average 5-year CD rebounded from its drop last week, rising from 3.30% APY to 3.34% APY. The top rate dropped even as the average rose. The top rate last week was iGOBankings's 3.55% APY CD. This week it's Bank United with a 3.50% APY 3-year CD and Acacia Federal Savings Bank with a 3.50% APY 5-year IRA only CD paying. These top three rates have remained steady.

The chart below shows that CD rates have largely stabilized although there is still a slight drift down in short term rates and savings accounts.

If we zoom in a bit we can see what this looks like over the past 14 months.

With savings and short-term CDs drifting down and longer maturity deposits firming, we're continuing to see the savings/cd spread remain near record highs. What does that mean? It means as a depositor, you are being compensated more highly for putting your money into a longer-term deposit account then you were even a year ago. This isn't a suprise as savings rates and short term cd rates have collapsed while longer-term CD rates have come down much more gradually.

As we've discussed in the past, the elevated ratio means it may be worth taking a look at a longer-term CD, especially one that doesn't have an onerous early-withdrawal penalty. You can now earn 1.5 percentage points more by opening a 5 year CD versus a 1-year CD. If interest rates stay low for the next couple of years, as is possible, then perhaps this elevated spread makes opening the account worth it.

Regardless of this analysis, CD laddering may be a good way to smooth out the return you receive from your CD portfolio.