Why CDs Look Tempting Now
With rates up sharply from a year ago, yields on some short-term certificates of deposit now rival the returns on 10-year Treasury bonds
By Amanda Gengler

(MONEY Magazine) – What's New

Short-term CDs are climbing out of their long slump. Six-month rates have more than doubled from a year ago to an average of 2.4%. Top-yielding one-year CDs, at 4% or more, are competitive with 10-year Treasuries. Longer-term certificates, however, have barely budged from a year ago.

Best Strategies

• Stay short. Opt for maturities of one year or less. You won't lose much in yield and can always reinvest at maturity if rates go up.

• Consider bump-up CDs. You'll sacrifice only about a quarter of a percentage point in yield to gain a one-time chance to raise your rate to current market levels for the duration of the CD's term.

• Get out of town. Bypass your local bank and shop around for the best deals. Check the list below or go to bankrate.com for top CD rates, often found at Internet banks or out-of-state institutions.


Short-term yields should continue to rise, at least through year-end. Experts remain mixed about whether and when longer-term rates will follow suit.

SAVINGS NOTES AND SOURCES: CD and money-market account data as of July 12 from 100 Highest Yields ($124 for 52 issues; 800-327-7717). Tax-exempt and taxable money-market fund data as of July 12, from Money Fund Report (imoneynet.com); all have a minimum investment of $10,000 or less and assets of $25 million or more. Bond fund data as of June 30 from Lipper; all are medium- and high-quality funds without front-end sales loads and with average maturities of three years or less. [1] Manager absorbed all or some operating expenses. [2] Deferred sales load: 1%. CREDIT NOTES AND SOURCES: All rates subject to change. Credit-card rates are for standard cards as of July 12 from Bankrate.com and are variable unless otherwise indicated. Survey does not include Internet-only cards or AmEx Blue. [1] Visa only. [2] Fixed rate. [3] MasterCard only. [4] Platinum and gold cards.