Are CD’s becoming short term again?

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I’ve always seen CD’s as an excellent investment.  They have always been some of the best mid-term savings instruments.  Occasionally, they can be excellent short-term investments as well.  With CD’s paying in the range of 5% for 9 months and up now, I think they have become a very good short-term investment instrument again.  The increase in rates gives them a competitive advantage to most local savings accounts and keeps them in line with the rates of most of the internet savings accounts like ING and HSBC.

Generally, the longer a financial institution can hold your money, the more money they make off of it.  So if they can make you lock your money into a 18 month CD to get a rate comparable to a high interest savings, they will.  It would seem that they are feeling some pressure to offer those higher rates on shorter term CD’s which is excellent if your in the mood for a CD Ladder. It is also excellent if your still a little queasy about having your money in an online bank and want something that pays better than a local savings account.  Of course, most of the higher paying ones are through the internet banks, but i have seen a couple of 12 month CD’s that have paid 5%+ at my local institutions

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