Local CD rates rise in quarter

Local rates on certificates of deposit, bank money market accounts and savings accounts have edged up slightly, but other states have experienced bigger increase s, according to Dan Geller, executive vice president of Market Rates Insight, a San Francisco-based financial analysis firm.

Rates on CDs climbed 0.18 percent in Alaska, 0.08 percent in Rhode Island and 0.07 percent in Kentucky during the first four months of this year, the firm reported May 10 .

At the same time, rates on CDs in Nevada on average rose 0.02 percent to 0.94 percent between New Year's Day and the end of April. In other words, the average $10,000 CD from a Nevada bank would pay $2 more over 12 months.

The average for Nevada bank money market accounts increased one-hundredth of a percent to 0.16 percent.

Geller attributed higher interest rates to increased demand for loans, reasoning that most banks raise interest rates when they need to attract more cash to make loans.

William Martin, vice chairman and chief executive officer of Service1st Bank of Nevada, agreed with Geller.

"While the increases in basis points (hundredths of 1 percent) are insignificant to any one depositor in terms of increased yield, looking at the averages for those thousands of banks certainly is evidence of an upward trend," Martin said. "Banks raise rates to increase liquidity and lendable funds; it is not at all off-base to assume those banks are seeing some increase in loan demand."

Some analysts suggest CDs, not to mention lower rates on other types of bank accounts, are a losing investment because inflation is higher.

"With today's CD rates, keeping up with inflation is hardly even possible," writer Sheyna Steiner observed in a Thursday blog on Bankrate.com, a website that provides information on bank loans and deposits to consumers. Taxes make the bottom line even thinner, she said.

However, it's hard to find a risk-free substitute for CDs.

So, should a saver buy a CD with a long maturity for the extra yield it will provide? Or should he stay short in hopes of reinvesting when CD rates rebound?

"I would say that anyone that locks that money for, let's say, more than one year needs to have some inflation protection built in," Geller said.

He suggested getting a "bump" CD which allows the saver to change the rate one time before it matures.

"The challenge with the bump CD is to know when to make a bump," he said. "It's like the stock market. Where is the tipping point? Well, good question."

Geller also recommended CDs that have no penalty if the saver withdraws his money during a short period of time, sometimes within the first six months.Nor do savers need to stay at home with their savings, he said. They can invest with an Internet bank or out-of-state institution that pays the highest rate.

"There is no downside to that. Ally Bank (and other out-of-state banks) are just as good as any brick-and-mortar bank. It's a personal preference," he said. "They are all FDIC-insured. It doesn't matter."

Some people feel more comfortable doing business at a neighborhood branch where they know the staff, he said.

Service1st Bank recently surveyed local banks for their rates on May 11. It showed that Service1st, First Security Bank and Bank of North Las Vegas all paid 0.95 recent interest for one-year CDs, the highest rate available in Southern Nevada for that time frame. Large regional and national banks typically pay lower rates because they are so flush with cash.

Contact reporter John G. Edwards at jedwards@reviewjournal.com or 702-383-0420.