CNB Bank Direct today raised the rates on its 12,18, and 24 month certificates of deposit. It's a welcome change from the constant rate decreases we've seen over the past year. The new cd rates are very competitive according to the BestCashCow rate tables. This offer is not for everyone though and is not visible on the homepage. To see it, you must login to online banking. You do this by having an high yield online savings account. So, a prerequisite for opening a high yield CD is first having a high yield savings account. The savings account currently offers 1.5% APY which is amongst the best savings account rates. There is also a minimum deposit of $25,000 to receive these rates.

Available Terms and Rates*
12 Month Certificate of Deposit 1.65% APY**
18 Month Certificate of Deposit 1.85% APY
24 Month Certificate of Deposit 2.15% APY
*Rates effective as of February 9, 2010. **Annual Percentage Yield

So, here's how to open the savings account and the CD:

1. Open the savings account online and fund electronically.

2. It will take 3-4 business days to open the account and fund it.

3. CNB then puts a 10 day hold on the money so it can't be withdrawn or technically used to open a CD, even at the bank.

4. You would apply from within online banking for the CD during this period. Once you sign the account agreement, the rate locks, even if the funds are not yet available. The CD gets opened.

5. Once the hold expires, the funds become available to be deposited into the CD.

So, it looks like it will take 6-7 days for a CD to become opened and locked. Obviously, if you already have a savings account with CNB Direct this process is much easier and faster. You can skip right to step 4.

CNB Direct is a division of Citizens National Bank, based in Bluffton, OH. Citizens National Bank was founded in 1920 and as assets totaling more than $481 million with 7 physical locations in Ohio: Bluffton, Lima, Elida, Van Wert, Celina, Findlay and Springfield. The bank is FDIC insured.

Their high yield savings account has received generally positive reviews on BestCashCow.

Last week the Fed gave its first indication that it might start raising rates sometime in the future. Bernanke stated that the Fed may raise the Discount Rate before long. The discount rate is the rate at which banks can take emergency loans from the Fed. It is not the same as the Federal Funds rate, which is more influential in impacting interest rates. Still, it's a start.

Over the past week, the issue of sovereign government default became more prominent as Greece jockeyes for a bailout from the EU. Many believe that Greece's debt problems are just a prelude to more problems from other highly indebted nations - Spain, Ireland, Italy, Japan. And some, like Marc Faber believe that mounting debt levels could even impact the United States.

A Federal Funds Rate predictions chart would show that markets do not anticipate a rate increase through the June Fed meeting. I suspect the rate will stay pegged at 0-25% a good deal longer, and potentially through the rest of 2010.

A low Fed Funds Future rate means low rates on savings accounts, money markets, and certificates of deposit for a good deal longer.

Savings Rates

Average saving rates hit a record low again last week moving from an average rate of 1.46% APY to 1.45% APY. While the averages have come down, the highest rates on the BestCashCow rate tables have remained steady. The highest rate is the Everbank Money Market Account, which is offering a 3-month guaranteed promo rate of 2.25% APY. The 1-year APY for the account is 1.51%. Following that is Franklin Synergy with a 1.75% APY and EBSB with a 1.67% APY. Other attractive CD rates are CNB Bank Direct at 1.50% APY and American Express Bank, FSB also at 1.50% APY.

CD Rates

Both the average 1-year CD rate and the average 5-year CD rate rose slightly over the past week while the average 3-year CD rate fell slightly.

The average 1-year CD rate rose by 1 basis point from 1.82% APY to 1.83% APY. The top rate continues to be 2% APY offered by Southern Commerce Bank.

The average 3-year CD rate fell by 1 basis point from 2.61% APY to 2.60% APY. The good news is that most of the rate leaders on the table remained stable. The top 3-year CD rate continues to be 2.8% APY offered by Hudson City Bank.

The average 5-year CD rate rose from 3.29% APY to 3.31% APY. The top rate continues to be iGOBanking's 3.55% APY CD. Acacia Federal Savings Bank also has a competitive IRA only CD paying 3.50% APY. The next best 5-year rate is Everbank at 3.37% APY. This marks the third week-in-a-row that 5-year CD rates have moved up.

Both the cd spread and 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 have collapsed while longer-term CD rates have come down much more gradually.

As we discussed last week, 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. Several banks have come out with breakable CDs, that allow users to withdraw money penalty free, and still other banks are lowering the withdrawal penalty for removing money before maturity.

Irwin Kellner, the Chief Economist or Marketwatch came out with an article today parroting what we've been saying for the last year: the Fed is punishing savers to the benefit of borrowers. The mainstream press has sporadically written articles about this but it's good to see it continuing to get attention.

In his article he writes:

"It can't come a moment too soon for the silent majority -- the nation's savers.

In its efforts to shore up the banking system, the Fed has neglected the needs of those who save. And in case you did not know it, savers make up the bulk of the population."

But are savers the silent majority? When you add up everone who has a mortgage, credit card, car payment, home equity loan, business loan, etc. I find it hard to believe that there are more savers. We run on a credit economy, not a saver's economy. That's why the outcry over low interest rates hasn't been louder. There are a lot of people who have debt or use credit and they are all benefitting in the current environment.

I know that I am. I'm a saver but I also benefitted from low rates by refinancing my mortgage.

The other question to ask is, did the Fed have any choice? Shouldn't credit be less expensive in a financial meltdown? After all, it makes no sense to raise interest rates while the economy is crumbling. The Fed is not going to keep rates at 5%. Of course rates were going to come down.

But that doesn't make it an easy pill for those loving on a fixed-income to swallow.

What can a saver do? Get smart. Look for the very best places to put money. Don't let money sit in a savings account earning 0.5% when banks are offering 1.5%. Look for the very best CD rates. Shop around.

If all the talk about inflation is correct, then savers may soon see their fortunes reversed, as rates climb quickly.