How the Debt Deal Hurts CD Investors

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NEW YORK (MainStreet) —Talk about buzzard's luck. Certificate of deposit investors just can’t get to that high yield plateau. Case in point: The recent debt ceiling debate in Washington.

It’s not like CD investors were actually rooting for a debt default, but any default or even ratings downgrade would likely have led to higher borrowing rates for Uncle Sam. That would have led global and U.S. banks to hike their interest rates, too, which  would have hurt borrowers looking for big-ticket items like cars and homes.

On the deposit side though, the deal works the same way: rates on traditional bank deposit vehicles like certificates of deposit, money market accounts and traditional bank checking and savings accounts won’t be rising either thanks to the deal.

Bank deposit consumers still need a break.

Here’s a look at the average national CD rate picture for Aug. 4, 2010, a year ago as measured by the BankingMyWay Weekly CD Rate tracker.

  • 60-Month CD: 1.947% Aug. 4, 2010 / 2.007% Jul. 29, 2010
  • 48-Month CD: 1.644% Aug. 4, 2010 / 1.703% Jul. 29, 2010
  • 24-Month CD: 1.122% Aug. 4, 2010 / 1.142% Jul. 29, 2010
  • 12-Month CD: 0.703% Aug. 4, 2010 / 0.712% Jul. 29, 2010
  • 6-Month CD: 0.454% Aug. 4, 2010 / 0.460% Jul. 29, 2010
  • 3-Month CD: 0.290%  Aug. 4, 2010 / 0.295% Jul. 29, 2010

Now here is the national CD rate outlook for this week, as of Aug. 2, 2011, according to BankingMyWay.

  • 60-Month CD: 1.569% Aug. 2, 2011 / 1.563% Jul. 26, 2011
  • 48-Month CD: 1.229% Aug. 2, 2011 / 1.223% Jul. 26, 2011
  • 24-Month CD: 0.683% Aug. 2, 2011 / 0.677% Jul. 26, 2011
  • 12-Month CD: 0.429% Aug. 2, 2011 / 0.423% Jul. 26, 2011
  • 6-Month CD: 0.272% Aug. 2, 2011 / 0.269% Jul. 26, 2011
  • 3-Month CD: 0.171% Aug. 2, 2011 / 0.169% Jul. 26, 2011

If there is a sliver of good news, it’s that CD rates were largely up last week to this week. But year over year, the data tell a bleaker story. There is no rate category in the above list that hasn’t fallen at least 100 basis points, and several – six-, 12- and 24-month CDs especially – have almost doubled their losses in terms of lost yields.

No doubt any delay in a debt deal might have ticked up CD rates significantly. Fortunately for the economy, that didn’t happen. Unfortunately for CD investors, it did.

That said, there are some opportunities for enterprising CD rate hunters. Check out the CD deals via BankingMyWay’s CD Rate Search. It’s the most thorough review of bank CD rates in the market.

—For the best rates on loans, bank accounts and credit cards, enter your ZIP code at BankingMyWay.com.

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