where to find winter’s best CD rates

Ever since the Federal Reserve lowered interest rates in 2008 to lessen the blow of the Great Recession, it’s been hard to earn much on your savings.

The Fed finally began raising rates last month. But since banks are slow to react, and more substantial hikes by the Fed will be rolled out slowly over the next several years, better yields are still ahead of us.

So where should you put your hard-earned cash in the meantime?

With the typical savings account paying a pathetic 0.10% APY, it’s definitely worth your time to find higher-paying options, such as certificates of deposit.

Nationally available bank CDs are paying as much as 2.30% APY this winter, while credit unions and community banks are offering local deals that pay nearly 3% APY.

There are also a number of strategies for smart CD investing, like starting out with small, regular investments or choosing a CD that allows you to earn a higher return if rates go up.

Let’s begin with the banks offering the best nationally available deals on three of the most popular CD terms: 1 year, 2 years and 5 years.

To qualify for these lists, a bank must sell its CDs to savers in all 50 states, online, over the phone or through the mail.

Is it possible to do better than this?

It is if you’re lucky enough to qualify for one of the country’s credit unions or community banks that often pay better-than-national CD rates.

Pioneer Valley Credit Union, for example, is paying 2.57% APY on 5-year CDs and 1.17% APY on 7-month CDs, available to residents of five New England states plus New York.

NASA Federal Credit Union is offering a chart-topping 4-year return, paying 2.30% on a 49-month CD available to savers everywhere.

For a mid-term investment, 1st United Services Credit Union is hard to beat in California, offering 2.00% APY for a 3-year term.

Among the best short-term offers, in addition to Pioneer Valley’s above, is XCEL Federal Credit Union’s nationwide offer of 1.50% APY on 12-month certificates.

These are just a few examples of what’s available locally. Two easy ways to ferret out your own best deal are searching Bankrate’s database of the best CD rates, or checking out the top-paying local deals on Bankaholic.com.

CDs with no or low minimum deposits

Now, some of those deals require pretty hefty minimum deposits.

For instance, E-Loan’s CDs require $10,000 to earn their top rates, while banks like Silvergate and Synchrony often require $25,000.

Don’t have that much? (At least not yet.)

The banks below offer some of the best nationally available returns with some of the lowest minimum deposit requirements:

• Ally Bank: No minimum
• Barclays Bank: No minimum
• Capital One 360: No minimum
• American Bank: $500
• AmTrust Direct: $500
• BAC Florida: $500
• Main Street Bank: $500
• MyBankingDirect: $500
• GE Capital Bank: $500
• Nationwide Bank: $500
• State Farm Bank: $500

Starting with small, regular deposits

Another way to start saving with CDs if you have limited funds is to open an account that lets you make small, regular contributions to a CD.

There aren’t many products like this that pay a competitive rate. But if you’re lucky enough to live in the Boston area, you can open a Thrive account withHanscom Federal Credit Union.

You can contribute as little as $5 and as much as $500 per month to this 1-year CD paying 3.00% APY.

Another option is to make regular deposits into a top-paying online savings or money market accounts.

With the best of those paying more than 1%, they’re also a good place to establish a regular savings habit until you accumulate a large enough balance to transfer to a better-paying CD.

Rate-bump CDs

Rate-bump CDs are a good option for savers anticipating higher rates and who don’t want to be locked into a less lucrative return.

Sometimes these CDs offer significantly lower interest rates in exchange for the rate-bump option, which means you’re better off investing in a regular CD and perhaps paying an early withdrawal penalty later if rates increase significantly.

But CIT Bank’s RampUp™ Plus CDs offer from 1.20% APY on 1-year terms to 1.78% APY for a 5-year term, all with the option for one rate increase during the term.

Also keep an eye out for local promotions, as you can sometimes score a rate as competitive as standard CDs with the bump-up option tacked on.

For instance, Iowa and Illinois savers (plus any Hawkeye alumni) can joinUniversity of Iowa Community Credit Union and earn 1.75% APY on 23-month rate-bump certificates, or 2.25% APY on a 37-month option.

Low early withdrawal penalties

CDs with low early withdrawal penalties are another option for savers waiting for the Fed to push rates higher and who suspect they might want to ditch current CDs before they mature.

These are a better option than CDs specifically marketed as “easy access” or “no penalty”, which allow you to withdraw your money any time but pay far inferior interest rates.

Among nationally available CDs, Ally Bank imposes the smallest penalties for early withdrawal, calculated as two months’ interest penalty on terms up to 2 years; 3 months on 3-year CDs; 4 months on 4-year CDs; and 5 months on all terms of 5 years or longer.

The next best choice is a bank that assesses just a six-month interest penalty, which you can find at any of the following banks:

• 5Star Bank
• ableBanking
• American Bank
• American Heartland & Trust
• Barclays Bank
• California First National Bank
• Colorado Federal Savings Bank
• Hudson City Savings Bank
• North American Savings Bank
• Sallie Mae Bank
• State Bank of India – Chicago
• Synchrony Bank
• TAB Bank

As we look toward a new era of rising rates for savers, smart CD choices like these can help you squeeze as much return from your savings as possible.