Premium in 1-Year CD Rates Over Savings Rates At Highest Point in a Decade

Based on BestCashCow’s computations, the spread between the average online savings rate and the average 1-year CD rate is now approaching 60 basis points. This means that in return for locking up your money in a one-year CD, you can get a bigger premium over just leaving it in an online savings rate than at any point over the last decade. In fact, you will likely get as much as 6/10ths of a percent more.

While savings rates have increased in past months, CD rates (including those as short as 6-months) have increased more quickly and more precipitously, as banks set their CD rates based on the Federal Reserve’s guidance for rates and their own economic predictions (which factor into the increased likelihood of real inflation due to Trumpian tariffs).

You can see the complete graph of the spread between one-year CD rates and savings rates at the top of this page. You can see the most current one-year CD rates on that page. You should also check 1-year rates at banks near you and at credit unions near you as they may be higher.

In the Fed’s most recent June meeting, it forecast two more rate increases before the end of 2018 – bringing the Fed funds target rate to 2.25 to 2.50% by December. Jay Powell’s team also forecast a 3.125 Fed funds rate at the end of 2019 and a 3.375% Fed funds rate at the end of 2020.

Whether one-year CD rates make sense for you personally depends on your own view of the Fed’s guidance for economic developments and on your own personal circumstances. You should also read BestCashCow’s 65 Questions to Ask Before Investing in a CD.

It is our belief that given the likelihood of much higher savings rates over the coming 12 months, you should err now towards foregoing the premium that one-year CDs are offering and and continuing to invest in online savings accounts or local savings accounts.