I've been saving up for a house over the last year and have accumulated a litle cash stash. My dilemma is that I want to keep the stash safe but also want to earn the highest return possible. After all, any extra cash I make goes towards the house. I popped into my local Bank of America to see what they were offering on a 1-year CD and was shocked at how low the rates were - .45%. I have to almost pay them to put my money in the bank. Which is ridiculous for a saving account or a CD because the bank isn't doing anything with the money except lending it out. That's how banks work - they take your money at .45% and lend it out at 5%+ as mortgages, credit cards, home equity, etc. The spread, or the difference between what they pay you for the money and what they earn lending it, is their profit.
The last time I had really payed attention to bank rates was back in 2007 and that time a 1-year CD was something like 5%. Times have changed.
Well, at .45% I wasn't jumping to invest my money. So, I went online and did some research on the highest rates available in my area and online. I don't mind opening an account online but if I can find a local bank that pays a good rate, all the better. There are a bunch of rate sites our there but the one I like is BestCashCow. It provides comprehensive local rates as well as online rates. The best rate I found for the same 1-year CD was CNB Bank with a 1.35% APY CD rates. Locally, there was a bank 3 miles from my home offering a 1.20% APY CD. Both were way better than the .45% rate. I decided to go local and opened the 1.20% APY. I don't plan buying a house until at least 16 months from now so I don't mind locking up the money.
The point is that if you shop around a bit, you are likely to find a much higher rate. All of the banks om BestCashCow are FDIC insured so there is no extra risk in earning more money.