Shopping for a CD is starting to be fun again.

Yields on certificates of deposit, which just two years ago were hovering at record lows, have hit their highest levels in nearly five years.

"This has been a good time for CD investors. It's long overdue," said Greg McBride, senior financial analyst at Bankrate.com in North Palm Beach, Fla., which tracks a variety of deposit and loan rates. "Income-dependent investors like retirees are seeing their cash investments finally bear fruit."

Yields on one-year CDs have topped 5 percent at a number of aggressive banks nationwide and are poised to head higher in coming weeks following Tuesday's increase in short-term interest rates by the Federal Reserve.

Over the last year, as the Fed engineered a string of rate increases designed to stifle inflationary pressures, average yields on short-term CDs have jumped by more than a full percentage point.

Nationwide, the average yield on a six-month CD was 3.14 percent this week, up from 2.11 percent the same time last year, according to Bankrate.com. One-year certificates were yielding 3.62 percent compared with 2.54 percent a year ago. On five-year CDs, the average yield was 4.02 percent, up from 3.73 percent.

The best news, Mr. McBride said, is that at the same time yields have risen, inflation has remained tame. So instead of seeing savings erode, CD holders are starting to enjoy real gains.

Inflation averaged 3.4 percent last year and 2.7 percent in 2004.

"You have to consider your returns net of inflation," he said. "What matters most is how much you are bringing home."

As rates have risen in recent months, so has the popularity of CDs, favored by retirees and other investors who don't want to risk losing their principal and are wary of a stock market whose gains pale in comparison to the go-go 1990s.

At the end of February, a little more than $1 trillion was invested in certificates by individuals and businesses, according to Federal Reserve data. That was up 20 percent from $840.7 billion a year earlier and 27 percent from the $792 billion invested in June 2004 before the Fed began raising rates.

Even though rates are perking up, they have a way to go to match the CD heydays of the 1980s, when one-year certificates were yielding an average of 11 percent or more.

With yields expected to drift higher in coming months, Mr. McBride advises investors to avoid locking in for the long term so they are poised to snag the more attractive rates. He recommends sticking with CDs that mature in a year or less.

Because CD rates vary widely, savvy consumers can boost returns significantly by shopping around.

Bankrate.com lists the 100 highest yields nationwide at its Web site, www.bankrate.com. A sampling of local deposit rates is available in the Post-Gazette business section on Wednesdays.

Savers wary about dealing with an out-of-town bank shouldn't be, Mr. McBride said, as long as the institution is insured by the Federal Deposit Insurance Corp.

"The difference in return is literally money on the table there for the taking," he said.

Consumers also may be able to get a better rate simply by asking their local banker. Some have the latitude to bump up yields for longtime customers or customers with big deposits.

When it comes to getting the best returns on a money market account, a popular place to park cash for everyday needs and emergencies, comparison shopping is even more crucial.

While the average yield on money markets is just 0.8 percent nationwide, there are some banks paying 4.5 percent or more.

"A money market account is a rainy day fund that everyone needs," Mr. McBride said.

"Earning a return that outpaces inflation is mandatory."