Its been over a year since bank cd rates hit their low. Most banks offer somewhere in the 1% range, and 2 if you are fortunate to find it. This has been a cause of the economy and worsening conditions in the USA with the mortgage and home crisis along with Bank closing down left and right. The only way that banks will be able to bring back the high rates is if the Federal reserve raises their rates to the banks. Basically this means charging them more to borrow.

The reason banks get your money and use it towards investments is because they know they can make a return. If they aren’t doing well then they can’t offer the rates you would like to see. Take for instance, the 2nd largest bank out there behind Bank of America… namely Chase. JPMorgan Chase cd rates are at their lowest, but they have never really offered anything comparable to the smaller banks. Why is that? Because they have so many members who are willing to lock in at a lower rate, they have no need to compete with the mom and pop banks in small towns so to speak.

Bottom line about rates in 2011 is this. If you think the economy will get better, then cd interest rates will increase. If things don’t change at all then they will only remain at their measly 1% and never rise again. If you want to get something better than what you would find at one of the large banks then just go with a local bank or credit union. Many times they offer a rate that beats out the national average. You might even get better service than you would at a nationwide bank.

If you feel scared to invest in these smaller banks, don’t be. Remember that your investment is covered up to $250,000 should a bank go under. That means if your favorite bank goes out of business tomorrow you are covered by the government and will be paid back. We don’t recommend putting all your money in just CD’s however. There are many more useful ways to invest that will make you a considerably larger amount.