The Mid-Western states tend to have the highest average CD rates but we've found some Northeast Banks offering relatively attractive 5-year CD rates. Attractive nowadays are yields slightly under or above 3% APY for a 5-year CD. That rate may seem unappealing, but it's not so bad when you consider that the average 5 year CD rate is around 2.25%. With a little shopping you can find an online or local bank paying significantly more.

Below are several banks in the Northeast that stand out for their rates:

• Signature Bank, located in New York, NY is offering a 3.04% APY CD with a $5,000 minimum balance. Signature is a $11.7 billion bank with 23 branches. Financially, the bank has a 5.27% Texas Ratio, far below the 24.44% national average (lower is better).
• North Shore Bank, located in Peabody, MA is offering a 3% APY 5- Year CD with a $1,000 minimum balance. North Shore is a $450 million bank with 8 branches in Massachusetts. The bank has a Texas Ratio of 2.07%, far below the 24.44% national average.
• Union Savings Bank in Danbury, CT is offering a 60 month CD at 3.00% APY with a $100,000 minimum balance. Union is a $2.4 billion bank with 28 branches and a Texas ratio of 26.52%.
• Harmony Bank in Jackson, NJ is offering a 60 month CD at 3.00% with a $1,000 minimum balance. Harmony has $91 miillion in assets and its Texas ratio according to BestCashCow is reported at 0%. The bank was established on September 2, 2008 and may not have enough delinquent loans yet to have a Texas ratio above 0%.

In most states and local areas, a little bit of research will yield a rate from a sound bank well above the national average.

There are a ton of ads floating across the internet offering you an “Ipad” bundle or a new Samsung flat screen TV if you open a new 2-year CD.

If you click on one of the advertisements, you will immediately be transported back to 1996 which was not only the last time gifts were routinely offered for opening a CD, but also appears to be the year that the website where you have landed was designed.

If you can navigate through the 1996-ness, you find an offer that is real and present and interesting, but not for everyone. The two-year CD rate is 1.85% - which today is a very competitive 2-year online CD rate. In some parts of the country, you will find better 2-year CD rates at local banks or local credit unions. (Giftsforbanking is also offering three and four year rates on this product that are not competitive).

If you open a 2-year CD with over $100,000, you’ll receive a coupon redeemable for any of several products such as a Trek bike, a 55-inch Samsung curved TV, a 12-inch MacBook, a tag Heuer Aquaracer watch, a Baume & Mercier watch, a Canon Eos camera or a DeLonghi expresso machine. With only a $25,000 deposit, you can get a current third-generation Apple watch. With a $50,000 deposit, you can get a number of other interesting products or packages, such as a Bose speaker. Based on our research, it appears that you can get a gift or package of gifts that retails as high as $1,500 with a $100,000 deposit, and for those who are number crunchers, such a gift will gross up a CD return by 75 basis points annually.

GiftsforBanking is owned by Flushing Bank. The bank was established in 1929 as the Flushing Savings Bank in the Borough of Queens, New York and renamed in 2010. With assets in excess of $6.2 billion, it is now one of New York State’s largest banks. You can learn more about the bank here. Flushing Bank owns IGoBanking and Bank Purely and this CD is opened through the IGoBanking website. They permit more than one CD to be opened under this program which is also quite interesting, but, as with any bank, you should stay within FDIC-insurance limits.

The fine print on the GiftsforBanking website includes the following language:

“There is a substantial penalty for early withdrawals, including the value of the gift chosen. The value of all gifts will be considered as interest on your account for tax purposes in the first year the account is opened. A 1099-INT statement for the value of the gift (including applicable sales tax, shipping and handling costs) will be issued for the year of gift redemption.”

When we contacted Flushing Bank, we learned that the penalty for early withdrawal is 6 months on the 2-year CD and that those redeeming can expect a 1099-INT for “more than” $575 for a $25,000 deposit, $1100 for a $50,000 deposit and $1700 for a $100,000 deposit.

With the receipt of the 1099-INT, you will be responsible for reporting and paying tax at your ordinary tax rate in the year in which you open the account. Should you need to terminate the CD early, you’ll also be out the bank’s 6-month early withdrawal penalty as well as the amount reported under the 1099-INT.

This offer therefore only makes sense if you are entirely certain that you will not need or want your principal back before maturity and that the product you are receiving as a gift is one that you would definitely want to purchase anyway. But, if your goal is simply to be rewarded for your banking activity, we prefer opening a new travel rewards credit card where you can get more value without locking up your capital and receiving a tax liability.

In somewhat of a surprise move, the Federal Reserve cut rates by 50 basis points today. In addition, the central banks of Europe, Canada, the UK, Switzerland, and Sweden also lowered their rates. The global scope of this rate reduction is unprecedented.

While the timing was a bit unexpected, we've been foecasting a rate cut for some time. Yesterday, markets pegged the probability of a rate cut in October at greater than 80% with a drop to 1.25% being the most likely scenario. But that's not the end of it. Markets believe there is a 70% change that the Fed will drop rates to 1% by December. It appears that the markets expect further cuts.

These numbers reflect growing awareness that the financial system is in severe crisis and that the recently passed bailout package will not be enough to right the ship. The Fed is loading all of its weapons to try and reinflate the economy and get banks lending again.

Rates on savings accounts cds, and money markets will drop. In fact, we've already seen falling rates on some products. If you plan on opening a CD, you might want to consider locking in now. If the Fed Funds Rate drops, the rates on savings accounts and certificates of deposit will also drop.

For my ongoing commentary on interest rates and where they are going, please visit my Fed Funds Rate Discussion.

• View the best cd rates.
• View the best savings account and money market account rates.