Our FRED graph above displays the average annual interest rates (also called yields) for three common types of retail bank and credit union deposits, as reported by Bankrate Monitor.*

• CDs/certificates of deposit. The funds are left on deposit for several months or years to collect a set interest rate. Withdrawing the funds early requires paying a penalty fee. (The dashed green line shows 1-year CDs, and the solid blue line shows 5-year CDs.)
• Savings accounts. Funds not needed for daily expenses earn a variable interest rate. There may be limits to how often or easily money can be withdrawn. (Shown by the dotted red line.)
• Checking accounts. Money used for daily expenses can be accessed by writing checks or by using automated teller machine (ATM) cards or debit cards. Some checking accounts offer a variable interest rate. (Shown by the dashed-dotted purple line.)

Bank accounts where funds can be withdrawn more easily or at low cost generally offer relatively lower interest rates. Put differently, accounts where funds are relatively harder to turn into cash will generally offer relatively higher interest rates to attract depositors.

So, we’d expect to see a 5-year commitment to storing funds to earn you a higher interest rate than a 1-year commitment. But what do the data show us?

Between October 2022 and the time of this writing, the average interest rate on a 1-year CD was reported to be higher than the average interest rate on a 5-year CD, due to uncertainty about future financial market conditions. This type of inversion in the expected structure of interest rates is discussed in a FRED Blog post from 2018 and further described here.

*FRED recently added 15 new series from the Bankrate Monitor National Index. These weekly data report average interest rates on checking and saving accounts, certificates of deposit, credit cards, auto loans, mortgages, and other lines of personal credit. The Bankrate data are collected weekly from a survey of the “10 largest banks and thrifts in 10 large U.S. markets.” Data on CDs are available since 1984, and data on other types of deposits were added in more recent decades.

How this graph was created: Search FRED for and select “Bankrate Monitor (BRM): Certificate of Deposit APY – 5 Year CD – APY.” Click on the “Edit Graph” button and select the “Add Line” tab to search for “Bankrate Monitor (BRM): Certificate of Deposit APY – 1 Year CD – APY.” Don’t forget to click on “Add data series.” Repeat the last two steps to add data on “Saving accounts” and “Interest checking accounts.”

Suggested by Diego Mendez-Carbajo.