Now Might Be A Good Time To Ditch Those CD Accounts

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Photo: Flickr / Thomas Hawk

Having doubts about rolling your maturing CD balances into new CDs? You’re probably not alone.Last week, the average five-year CD yield in the U.S. was 1.06 per cent, an all-time low in Bankrate’s national survey.

That means any returns you’ll get on such CDs will lag the current rate of inflation, 1.7 per cent per year, by more than half a percentage point. In other words, investors stashing their money in a CD today will almost certainly lose significant purchasing power by the time that CD matures.

Americans are taking notice of the sorry state of CDs. According to the latest edition of the Federal Reserve’s H6 Money Stock Measures report, in the last week of July, Americans held only $686.8 billion in “small-denomination time deposits,” Fed-speak for CDs. To put that number in historical perspective, it’s the lowest seen in the H6 release since October 1980, when the U.S. economy was less than half the size it is today.

What do you think? Are you abandoning CDs over low rates?

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