Banks have so much cash on hand and interest rates on deposits are so low that in some cases, you'd be ahead of the game if you stored your money in a mattress.
According to Bankrate.com, the national average on 1-year CDs is 0.36 percent. That's right, about one-third of a percent annually, or just $4 in interest on a $1,000 deposit at the end of a year. Money market checking accounts? Forget it, at the 0.10 percent typically paid, you'll have a buck to show for your $1,000 deposit.
The fact is, many banks really don't want your money. Consumers and businesses have moved money out of the falling stock and bond markets and parked it in bank accounts. In response, some banks are even passing along the cost of federal deposit insurance and imposing fees on accounts where piles of cash are moving in and out too much. The result is that you might pay the bank for the privilege of keeping your cash there.
In August, Bank of New York Mellon announced a fee of 13 basis points, or 0.13 percent, on large deposits.
"In the past month, we have seen a growing level of deposits on our balance sheet from clients seeking a safe-haven in light of the global interest rate and credit environment," the bank said in a statement. "As markets stabilize, we expect deposit levels will trend lower as they are redeployed into the markets. At that time, it is likely this fee will no longer be necessary."
So what's an investor to do to safely get a little more return?
"In safe things, if we factor in a percentage for inflation, you're losing money every day," said Ted Schwartz, president of Capstone Investment Financial Group and an ABC News columnist. "Money markets are paying historic lows, short-term bonds may have less there if you need money immediately. The only thing left is something that's going to have a bit more risk to it."
"You have to choose between taking some risk or not getting any real return at this moment," says Schwartz.
And, right now many banks just aren't giving great returns because they have more money than they know what to do with.
"We just don't need it anymore," said Don Sturm, the owner of American National Bank and Premier Bank, told the New York Times. "If you had more money than you knew what to do with, would you want more?"
"Money market funds don't pay as much but you're not going to get hit with extra fees because the accounts don't come with bells and whistles," said Eric Tyson, the author of Personal Finance for Dummies.
"If you want to get some return without taking a lot of risk then a shorter-term bond fund would be a way to go," he continued. "The price of that fund will fluctuate with changes in interest rate and the principal value of your account is going to change."
If you're still considering certificate of deposits, Schwartz says, look for three-month CDs or set up an account that rolls over into short-term certificates.
"Don't tie it up for five years in a CD to get 2 percent because we don't know what interest rates are going to be two years now," says Schwartz. "When interest rates finally go up, and I have no guess when, you don't have your money tied up in something earning two percent."
By shopping nationally and sticking with FDIC-insured banks you can easily beat the paltry national average rates. Bankrate.com notes that Popular Community Bank is paying 1.15 percent on 1-year CDs. American Express Bank pays 1 percent on money market accounts.
For short-term bond funds you can screen for expenses and performance at Yahoofinance.com. These do entail some risk, but year-to-date yields in the 5 percent range are common. Another possibility, but again with risk, is shares of companies that pay dividends. Look for stocks that have steadily increased their dividend payout and that have a stable share price. Ted Schwartz has stock-picking advice here.