The best local 12-Month CD rates run from 1.30% to 1.91% APY this week. With a little bit of research you can get a rate that is 50 to 100 basis points higher than what many banks are offering. Examples of some of the highest local rates on BestCashCow are:

• Farmers & Merchants Bank is offering a 1.91% APY 12-Month CD with a minimum balance of $100,000. The rate drops to 1.71% APY with a $1,000 minimim balance. They only offer local accounts.
• People's Bank And Trust Company Of Pickett County is offering a 1.90% APY 12-Month CD with a minimum balance of $25,000. The rate drops to 1.80% APY with a minimum balance of $500.
• Brush Country Bank offering a 1.75% APY 12-Month CD with a minimum balance of $100,000. They are presently only opening accounts in Texas although they have opened accounts nationally in the past.

You may be asking what's the point of these rates if you don't live in the local area served by the bank and can't open a CD? The point is that local banks in you area are probably also offering some great CD deals. Often, spending a few minutes to shop around can yield you an extra half a percent of yield. On BestCashCow we have competitive bank rates for every zip code in the United States. In just 30 seconds you can check out the best local CD rates and see if a bank in your area is offering a competitive deal.

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.

Financial products like foreign currency Certificates of Deposit can diversify your portfolio with foreign currency, but bear certain risks. EverBank, an established online bank, has taken the lead in developing these foreign currency products and they now offer FDIC Insured certificates of deposit that can be purchased in US dollars and track foreign currencies ranging from the Euro, to the Brazilian Real and the Indian Rupee. EverBank has also offered baskets of foreign currency CDs, where you can structure your CD to be divided among a handful of currencies, and a Dollar Bull CD, that might increase in value faster as the dollar rises against select foreign currencies. FDIC insurance for these products protects investors from a bank failure; it does not protect against currency fluctuations and the resulting loss of value in dollar terms.

How foreign currency CDs work:

1. You deposit your money.

2. They convert your funds into the currency of your choice.

3. They deposit your funds into an FDIC insured Certificate of Deposit.

4. At maturity the funds (the principal, interest, and currency changes) are converted back into dollars and can be withdrawn.

5. Or, the funds can be rolled over into another term CD.

How You Can Benefit from Foreign Currency CDs

• Interest. Like any Certificate of Deposit, depositors benefit from the interest paid on the invested amount. Depending on the currency, these rates can be quite high and can be higher than the equivalent rate of return in US dollars.
• Currency Movements. As the currencies you invest in rise and fall against the dollar, you can make or lose money. For example, if you invest in the Euro, and it strengthens 5% against the dollar during the term of the CD, you will have made an extra 5% on your investment. If it loses 5% against the dollar, you will have lost 5%.

If your goal is to track the performance of a certain currency and believe that currency will appreciate, but may be concerned about the risks to the banking system in that country, these products may make sense as they can extend US FDIC insurance where it may not otherwise be available.

If your goal is to outperform the US rate of return through getting a rate of return above that which may be available through a standard US-based CD, you may do better to look at a structured product issued by a US investment bank. Some US investment banks, for example, now offer collared products which will yield 10% if the Brazilian real appreciates against the dollar, but only 1% if it depreciates.

A Word of Caution

Use only US-based FDIC-insured banks. Foreign currency CDs offered by non-US FDIC insured banks and marketed through the internet at US citizens are SCAMS, even if they appear in Google, Yahoo! or Bing search results. The CD that is offering an incredible rate of return by investing in some currency or in US dollars in some bank that isn't FDIC insured in some country that you have never heard of sounds too good to be true because it is. Don't send your money there.