CD Rates: What Your $1K, $5K and $10K Deposits Can Earn Now
If you’ve been carrying extra cash in a checking account — perhaps from a bonus, tax refund or wedding gift — you may be leaving money on the table.
A low-risk place for your money to grow is a certificate of deposit, or CD. It is a type of account that usually pays a higher interest rate than a regular savings account. In exchange, the bank (or credit union) holds your money for a fixed period of time, usually anywhere from six months to several years. You will pay a penalty if you need to withdraw money early.
Most banks offer CDs with a yield of 3.5% to 4%, and some credit unions are advertising rates as high as 5%.
Based on a 4% APY, here’s what $1,000, $5,000 and $10,000 could get you in six, 12 and 24 months.
$1,000
At 4%, the growth rate of a certificate of deposit is very low. Compounding $1,000 for two full years with an extra $80 may not be worth it – especially if you want flexibility.
|
Term |
Perfect growth |
Interest earned |
|---|---|---|
|
6 months |
$1,019.80 |
$19.80 |
|
12 months |
$1,040.00 |
$40.00 |
|
24 months |
$1,081.60 |
$81.60 |
$5,000
Opening a 4% CD for $5,000 is a better deal — especially if you’re saving for a special purchase or vacation. After 12 months, $200 earned in interest could mean the difference between economy seats and extra leg room on your next flight.
|
Term |
Perfect growth |
Interest earned |
|---|---|---|
|
6 months |
$5,099.02 |
$99.02 |
|
12 months |
$5,200.00 |
$200.00 |
|
24 months |
$5,408.00 |
$408.00 |
$10,000
Over two years, $10,000 in a 4% CD will accrue $800 in interest without risk, assuming the account is FDIC insured. That tightening can give you breathing room on important things like rent and utilities. You can pay off some debt, splurge on a new laptop or put money toward your $7 daily coffee for about three months. The choice is yours.
|
Term |
Perfect growth |
Interest earned |
|---|---|---|
|
6 months |
$10,198.04 |
$198.04 |
|
12 months |
$10,400.00 |
$400.00 |
|
24 months |
$10,816.00 |
$816.00 |
Bottom line
Convincing someone to lock up $1,000 for two years just to get another $80 is hard work. A better pitch would be to earn $400 out of $5,000, or more than $800 out of $10,000, the dollar amount a CD would earn today at those figures.
For many investors, a CD is worth it if they can finance it for at least a few thousand dollars, even if it’s only for six months. Maybe your emergency fund needs a boost, or you have a big expense coming up.
Before moving your money, check if it is needed elsewhere now or in the next six months. If you won’t miss a deposit anytime soon, a CD is a safe way to boost your savings.
