The Federal Deposit Insurance Corporation refreshed its monthly rate benchmark on August 17, and the gap it revealed is a familiar one for anyone who hasn’t shopped around lately. The national average one-year certificate of deposit currently pays 1.71 percent, while the regulatory ceiling for that same product sits at 5.65 percent — more than three times higher. For a household with savings parked in whatever CD a local branch happens to offer, that spread between “average” and “allowed” is money left unclaimed every month it sits there.
What the FDIC’s National Average Actually Measures
The national rate isn’t a survey of the best deals available. It’s the average of rates paid by every insured bank and credit union with reportable data, weighted by each institution’s share of total deposits. That weighting matters: a handful of the largest banks in the country hold enormous deposit bases and often pay close to nothing on standard CDs, which drags the nationwide average down regardless of what smaller, more competitive institutions are offering. A saver comparing their own bank’s rate against the 1.71 percent average is really comparing it against a number shaped heavily by the biggest, least competitive players in the industry, not against what a motivated shopper could actually find.
The FDIC updates this figure on the third Monday of every month, and the August reading continues a slow climb rather than a sudden jump: Federal Reserve Bank of St. Louis data drawn directly from the FDIC series shows the one-year average moving up from 1.53 percent in April to 1.55 in May, 1.65 in June, 1.68 in July and now 1.71 in August. That’s a gradual drift, not a rate war, and it means the reward for switching banks has been building quietly for months without most account holders noticing.
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A 5.65 Percent Ceiling Almost No Bank Is Approaching
The 5.65 percent figure comes from a 2020 FDIC rule that restricts how much a “less than well capitalized” bank can offer depositors, calculated as the higher of the national rate plus 75 basis points or 120 percent of a comparable Treasury yield plus 75 basis points. It exists to stop weaker banks from bidding aggressively for deposits they can’t safely support, not to set a target for what healthy banks should pay. Well-capitalized institutions aren’t bound by the cap at all, which is exactly why some online banks and credit unions post CD rates several points above the 1.71 percent national average without breaking any rule — they simply compete harder for deposits than the industry average suggests.
That distinction matters for anyone assuming a bank offering, say, 4.5 percent on a CD must be doing something risky. A well-capitalized institution can legally pay anywhere up to and including the 5.65 percent ceiling; the cap only restrains banks the FDIC has already flagged as thinly capitalized. A rate well above the national average is far more often a sign of genuine competition for deposits than a red flag, as long as the account itself carries standard federal deposit insurance.
Locking Up Money Longer Currently Pays a Penalty
The FDIC’s data also shows something unusual for anyone assuming longer terms always pay more: they currently don’t. The 24-month average sits at 1.57 percent, the 36-month at 1.34 percent and the 48-month at just 1.27 percent — all lower than the 1.71 percent one-year rate. Checked against the FDIC’s archive of previous monthly releases, that inversion has held for several months running, reflecting a market that expects rates to ease rather than climb over the next few years. A saver who assumes a five-year CD automatically beats a one-year CD, and locks up cash accordingly, is working against the current numbers rather than with them.
The practical takeaway is that term length and yield aren’t moving together right now. A household saving toward a goal two or three years out doesn’t automatically get a better rate by committing further out; at the national-average bank, they get a worse one. Shorter terms, or CDs that allow a rate bump if conditions change, currently do more work for a saver than the longest available term.
Checking and Savings Accounts Pay Far Less Than a CD
The gap widens further outside of CDs entirely. The national average for interest checking is 0.07 percent, standard savings is 0.38 percent and money market accounts average 0.63 percent — all a fraction of even the modest 1.71 percent CD rate. Money that sits in a checking or basic savings account earning close to nothing isn’t safer than money in a CD; both are covered by the same federal deposit insurance up to the standard limits. The only thing a saver gains by leaving cash in a near-zero account rather than a CD paying national-average rates is convenience, and at these numbers that convenience has a real, calculable cost. For an emergency fund that genuinely needs to stay liquid, a money market account at 0.63 percent still beats standard savings by a wide margin without giving up same-day access.
What the Gap Costs on a Typical Balance
Run the numbers on $10,000. At the 0.38 percent savings average, that balance earns roughly $38 over a year. Moved into a 12-month CD paying the 1.71 percent national average, the same $10,000 earns about $171 — a difference of $133 for doing nothing more than choosing a different account at the same bank. Shift that money to an institution actually competing for deposits, closer to the 5.65 percent regulatory ceiling, and the annual return on the same balance would approach $565. Few banks pay anywhere near the ceiling, but the FDIC’s own numbers make clear the “average” bank and the best available bank are not the same thing, and the difference compounds every year the money stays put.
Scale that same math up to a more realistic retirement cushion of $50,000 sitting in a low-yield savings account, and the annual gap between 0.38 percent and even the modest 1.71 percent CD average grows to roughly $665 a year — money a household forfeits simply by not moving cash from one federally insured account to another. None of it requires taking on additional risk; it requires comparing the account a bank happens to offer against the range of legal rates the same federal rules already allow.
This article was produced with AI assistance and reviewed by a human editor. Figures are linked to their primary sources; where a claim could not be verified from the public record, we say so.
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