Maybe it’s a sign of the times, possibly the reflection of the new reality. Banks are not offering high rates for deposit accounts. Money markets, savings accounts and certificates of deposits are riskless investments; however they are necessary vehicles for the economy. Without these deposit accounts banks have no reserves to give loans. No loans, no (or little) new business or growth of existing businesses. The old adage is true: “One needs money to make money.” Yet, bank rates are a paltry 0.01 – two point something per cent.

Through all of my searching, the highest CD rate I have found is through Sovereign Bank. A five year CD is being offered for 2.96% APR (3.00% APY). This may seem interesting, given that they are a brick and mortar bank. Other 5 year CDs from internet (and internet dominated) banks have a much lower APY [Ally Bank 2.40% APY, Sallie Mae Bank 2.35% APY, Discover Bank 2.25% APY].

Oscar Wilde explains growing up by saying, “The young know everything, the middle-aged suspect everything and the old believe everything.” By this measure, I guess I have transitioned to being middle aged because I immediately questioned the motives of such a discrepancy. After speaking to a Sovereign Bank branch manager, I learned there is push to get savers like me, who are 98% internet based with no allegiance to a bank, back to coming into and using banks where one can physically walk into. Offering a high rate is certainly one way to make me walk through a threshold.

However, there is also another reason for the high rates aside from bringing people back…bringing in new people. Most readers probably have never heard of Sovereign Bank. It used to be traded on the NYSE under SOV, but in 2009 (January 30) Banco Santander (NYSE:STD) completed its purchase of Sovereign. With this new international backing, Sovereign, which was severely hurt by losses related to auto loans and stock in Fannie Mae and Freddie Mac, now is looking for growth. Branches currently exist in New Hampshire, Massachusetts, Rhode Island, Connecticut, New York (City and Long Island), New Jersey, Pennsylvania and Maryland. Notwithstanding, I’m sure they would be happy to take your money from any state.

CDARS is a service provided by select banks that allows you as a depositor to get up to $50,000,000 in FDIC insurance for Certificates of Deposit. The system works by distributing your deposits to other banks in the CDARS network so that no one bank holds over the maximum amount insured by the FDIC. The FDIC currently insures your deposits only up to $250,000 in deposits per ownership class at a single financial insitutions. This insurance covers all deposits (savings, checking accounts, etc.) in addition to CDs at that particular institution.

For the customer, this process is seamless.

Here's an example of how CDARS works:

• You walk into your bank with $2,000,000 you want to deposit into a 3-year CD.
• They quote you a rate and tell you it will be distributed via the CDARS network. You agree and sign the consent form.
• After you make the deposit, the money is broken up into denominations of less than $250,000 (so that accrued interest is covered) and then distributed to other participating banks that are FDIC insured. Therefore, $2 million might be divided among 9 or 10 banks, instead of 8.
• Your money collects interest, and is fully FDIC protected. You receive a statement from the original bank where you made the deposit.
• When your CD expires, you can go to the original bank and withdraw the full amount or roll the money over for another period.

The Benefits of CDARS

• Up to $50,000,000 in FDIC insurance. Using CDARS you can insure up to $50,000,000 with the FDIC.
• One Bank. There is no longer any need to run around to different banks opening accounts to ensure your money is fully FDIC insured.
• One Statement. You receive one statement from the original bank.
• One Rate. You receive one rate regardless of how many banks are used to insure your money.

The Disadvantages of CDARS

• Potentially lower rate. You will likely receive a much lower rate because CDARS charges banks a transaction fee. Banks often pass this fee on to their customers in the form of a lower rate. Banks may waive this fee for good customers, but you will likely be much better off unless you are super wealthy by dividing your money yourself among the leading CD rates on BestCashCow.
• Lack of Certainty. You do not get to choose which banks your funds are sent to nor do you even know. The only thing you do know is that every bank that accepts your deposits will be FDIC insured.

Before you even consider any CD (as with any savings account) be sure that you are dealing with an FDIC-insured bank - In order to secure the viability of the US banking system, the Federal Deposit Insurance Corporation (FDIC), an independent agency of the federal government, provides insurance in each qualified bank account for each qualified institution. Each depositor's insurance is provided to a maximum amount of $250,000 in each class of ownership.

While all deposits (CDs, Checking, Savings) held in the same type of ownership are added together and insured to up to the maximum amount, funds held in different classes of ownership (Individual, Joint, Trust, Retirement) may fall under separate FDIC insurance provisions. Please visit the FDIC's website to determine if your financial institution is insured and use its "ask Edie" program to determine your coverage limits.

We recommend that you deposit savings in only FDIC insured institutions and that you do not exceed FDIC coverage limits. Additionally, some major financial institutions claim that deposits over the single account FDIC insurance limits are insured because the financial institution divides your deposits between several separately chartered financial institutions; however, most of these claims have not been tested in the event of a bank failure.

You can check the best online rates here, but also check the best local rates and credit union rates.

You should also compare rates for different deposit terms (eg. 1-year versus 3-year versus 5-year rates). Except during periods rate expectations lead to an inverted yield curve, you will generally earn a higher yield with a longer term CD.

All banks listed on BestCashCow.com are FDIC-insured. All FCUs listed on BestCashCow.com are insured by the NCUA.

CDs, unlike savings accounts, are not completely liquid. Particularly, most certificates of deposit bear substantial penalties for early withdrawal, if it is even allowed. Ordinarily, the penalty for early withdrawal wil be a loss of accrued interest, but certain banks may also assess penalties that will result in a loss of some of your principal, especially if you withdraw you CD immediately after setting it up.