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Lifestyle & Budget

When the wicked witch lowers CD rates, go back to Kansas

Not all CD rates are created equal. Interest rates on these savings tools can vary widely depending on what bank you choose, how long you commit to keeping your money in the bank, and even where you buy your CD.

That last one turns out to matter a lot more than you'd think. CD rates are higher in some states than others. A lot higher.

Where to find the best CD rates

Midwestern states tend to have better rates than big coastal cities. recently researched CD rates across the country and found that:

  • Eight of the top 12 states with the highest average 1-year CD rates are located in the Midwest
  • Five of the top 12 states with the highest average 5-year CD rates are also located in the Midwest

In contrast, coastal states like New York and California ranked pretty far down the list. New York is 36th in rank for 1-year CDs and 42nd on the list for 5-year CDs. California rolled in at 38th for 1-year CD averages and 22nd for 5-year CD rates.

Why rates are better in the Midwest

The folks at theorized that this is due to two main things: strong local economies in agricultural states, and more small local banks offering competitive interest rates.

Small banks and credit unions can sometimes offer great deals to their customers. For small and medium-sized banks, in Oklahoma, the state with the best 1-year CD rates, there are only 15,828 people per bank while New York, much farther down the list, has 133,511 people per bank.

There's also the issue of local economics. In the Midwest, small banks are doing well because their customers are doing well. Eight of the top 11 states with the highest average CD rates are also in the top 10 in terms of agriculture as a percentage of their economy. Agriculture has been booming as food and commodity prices go up. According to, soaring commodity prices may also be creating higher CD rates for consumers in those states.

How to find the best CD rates

You don't have to be an expert on agricultural economics or Midwest community banks to take advantage of those sweet interest rates. You don't even need a pair of ruby slippers to take you to Kansas, even if you live in New York or California. Use an online bank.

Compare CD rates on hundreds of online banks at There you'll see current lists of the best interest rates available on a variety of CD terms. Then you can take advantage of online banking to get the best rate. Even if you're buying it from the first local bank of Oz.

Doing your research online lets you compare interest rates from all over the country, at big banks and smaller ones. It lets you shop around and seek out a more competitive interest rate than you might get from your local brick and mortar bank.

Building your CD ladder

Wherever you get your CDs, its important to protect yourself from interest rate fluctuations by building a CD ladder. Instead of putting all your money into one long-term CD, buy a series of CDs with staggered maturity dates.

As each CD matures, reinvest it in a longer term CD. For example, instead of putting $3,000 in a 3-year CD, put $1,000 each in a 1-year, 2-year and 3-year CDs. When your 1-year CD matures, buy a new 3-year CD with that money. Do the same when the 2-year CD matures. You'll have a CD maturing each year, but you'll be getting the (usually) higher 3-year rate.

This way, you can always be reinvesting your funds at the best current interest rate. You'll get a nice, steady return on your savings with this strategy.

CDs combine safety with high interest

By combining an aggressive search for the best interest rates with a solid CD ladder, you'll be making a safe investment that also gives you a solid return on your money. CDs offer some of the best savings rates around on FDIC-insured bank products. Using them can be a smart way to protect your nest egg while helping it grow.

It's important to find the best rates though. Don't settle for whatever your local bank offers. Shop around for a truly competitive rate, even if that search takes you to the Land of Oz.

The original article can be found at
When the wicked witch lowers CD rates, go back to Kansas