Why we put up with rock-bottom CD rates

By Marcie Geffner - Bankrate

Once upon a time in the U.S., people could purchase long-term bank certificates of deposit, or CDs, that paid interest rates of 10 percent or more per year.

That might sound like a fairy tale, but in fact it's true.

In the mid-1980s, five-year CD rates topped out near 12 percent, according to a Bankrate CD rate chart of national averages. Since then, however, long-term CD rates have tumbled so precipitously that investors today can find five-year CDs with rates ranging from less than 0.5 percent to perhaps 2.35 percent at best at some credit unions. The typical payout for a five-year jumbo CD ($100,000 or more) is 1.6 percent to 1.8 percent, a premium of about 1 percent compared with shorter-term CD rates, according to Bankrate's data.

Investors might well wonder why long-term CD rates are so low and why the premium for a longer term is so small. Arlen Olberding, founder of Guidepost Financial Planning in Fort Collins, Colo., suggests some trends that affect CD rates.

Read on: http://www.bankrate.com/finance/cd/rock-bottom-cd-rates.aspx