The 7% CD Is Here -- for Residents of This State

If we were playing Jeopardy last year and I were to say, "I'm going to earn above 7% on my savings next year in this investment," you might answer "what is an ETF" or "what is an I bond." Imagine your own surprise if I were to reveal the answer as a certificate of deposit (CD), one with a 7.19% APY.

This is perhaps not so surprising given the high rate environment we find ourselves in. The Federal Reserve's relentless charge against inflation has left it pulling the same lever, albeit with a few more notches on the dial than most of us were expecting. Since CD rates tend to move with the federal funds rate, the raising of the one has elevated the APY on the other, leaving us with CDs paying out generously.

Take the 7-month CD from Alpena Alcona Area Credit Union. With a 7.19% APY, this offer is the highest I've seen. But as with most credit unions, this CD comes with some major restrictions -- and may not pay as much money on your savings as you might think.

You must have ties with Michigan to be eligible

Before you get too excited, let's start with the first criteria. To be eligible for this CD, you must live, work, attend school, worship, or own property in the state of Michigan. This will make you eligible to join the Alpena Alcona Area Credit Union, which is required before opening this account. Alternatively, if you have immediate family members who are a part of the credit union, you could be eligible to join.

This isn't totally unusual. Many credit unions boasting unbelievable APYs are advertising them for residents of specific states (like the Landmark Credit Union's 7.5% APY on a checking account). But even if you do live in Michigan, there are still some restrictions you should be aware of.

The CD has a maximum deposit

The Alpena Alcona Area Credit Union CD requires $500 to open your account. But it also has a buzz-killing $7,000 maximum deposit. For anyone who has more than $7,000 to invest in CDs, this maximum will likely bring the offer back down to earth.

Still, it's not a bad deal. In fact, it could make for a solid rung in a CD ladder. Say you have $20,000 to invest in CDs. You could deposit $5,000 in a 6-month CD, $7,000 in the 7-month CD, and the rest in a long-term CD or two. Your overall APY would be lower than 7.19%. But it will be higher than if you didn't have the 7.19% at all.

It is important, however, to realize this is how credit unions and banks draw depositors in. They make big offers with small fine print. It's all too easy to skip over the tiny font at the bottom. But taking a moment to read the terms and conditions upfront will help you avoid disappointment later.

Don't worry -- other great CDs are still on the table

Non-residents of Michigan, take heart -- you still have plenty of great CDs to choose from. They may not earn 7.19% on your savings, but you could still lock in an incredible APY. Take a look at today's top-paying CDs to get an idea of how much you can earn. And keep your eye out for credit unions in your state or city -- you never know when that 7% CD will be coming to a bank near you.