How Much Does a $10,000 CD Make in a Year?
A certificate of deposit will typically offer higher interest rates than money market or savings accounts. In general, longer-term CDs pay higher yields because your money is tied up longer. But many banks and neobanks offer the highest rates for 12-month CDs, either as special promotional offers or their regular rates.
What Is the Current Interest Rate on CDs?
CD interest rates have increased dramatically in the past year, along with the prime interest rate set by the U.S. Federal Reserve. As of March 2024, the national average interest rate for a 12-month CD is 1.81%. The average rate for a five-year CD is 1.38%, according to the Federal Deposit Insurance Corporation.
CD rates are based on the term and the bank where you choose to open your CD. Interest rates may vary depending on the size of the CD, but that typically only applies to higher savings amounts over $100,000, called jumbo CDs.
How Much Does a $10,000 CD Make in a Year?
How much your $10,000 CD will earn depends on the term and rate you secure when you open your account. Here’s a look at a few different rates and terms:
At the national average of 1.81%, a one-year CD compounding monthly with a $10,000 opening deposit would be worth $10,182.51 when it matures.
A five-year CD with a $10,000 opening deposit, earning an average rate of 1.38% and compounding monthly, would deliver a return of $713.94 after 60 months.
However, it is possible to find rates of 5% or more. After a year, this would put $500 in your pocket with a $10,000 CD. These rates can be found at several banks and credit unions, so it pays to shop around before opening a CD.
If you are saving for a house, wedding, vacation or a new car, opening a $10,000 CD is a great way to set money aside. Your money will earn interest at a higher rate than you might earn with a traditional savings account.
Additionally, you won’t be tempted to withdraw funds from the account because you might face penalties and fees. When you are ready to make your purchase, you can close out the CD when the term ends and easily access the money you need.
What Is the Highest Paying CD Rate Right Now?
Some of the highest-paying CD rates are at CIBC Bank USA. Their 13-month CD offers APY. In addition to CIBC Bank USA, several banks and credit unions offer 5% or more on CDs with various terms.
CIBC Bank USA
To open a CD with a APY at CIBC Bank USA, you’ll need a $1,000 minimum opening deposit. To open an account, you must demonstrate all of the following:
Have a current U.S. home address or live in Puerto Rico
Possess a U.S. Social Security number
Have a valid U.S. driver’s license or a state identification number
CIBC Bank USA’s APY CD is a 13-month, fixed-rate CD. However, you can choose from other term lengths, such as nine months, 18 months, 24 months or 30 months if you prefer. Keep in mind that your APY will be lower if you choose a different term.
BMO
BMO offers APY on a 12-month CD. That means you’ll earn $516.85 on your $10,000 deposit at the end of twelve months. After the CD matures, you can renew for another 12 months at the day’s current rates.
If you decide to open a BMO CD, no minimum deposit is required. However, you must fund your CD within ten days to keep it active.
Lending Club
Lending Club has a 12-month CD with a promotional APY of . To open your account, you’ll need a minimum deposit of $2,500. Lending Club charges fees and an early withdrawal penalty if you remove your funds early, so it’s essential to review the account terms before committing your funds.
Benefits of CDs
Unlike many savings and checking accounts, CDs typically don’t have monthly maintenance fees. Because your money is locked in for a fixed period, you won’t face as much temptation to tap into the savings housed in CDs. Early withdrawals may result in penalties or fees.
Also, because you are keeping your money in a CD for a fixed period, known as the term of the CD, you know exactly how much you will earn on your CD when it’s time to cash it out. For instance, you can count on earning $500 from a 12-month, $10,000 CD at a rate of 5.00% APY.
CDs are also a safe option. When you open your account at an insured bank or credit union, your money will be covered up to $250,000 by the FDIC or National Credit Union Administration (NCUA).
Final Note
With CD rates higher than they’ve been in decades, it’s a great time to invest some of your short-term or even longer-term savings into a high-yield CD. CDs offer high interest rates, no monthly fees and guaranteed returns. They’re an easy way to earn money without risk.
FAQ
Here are the answers to some of the most frequently asked questions regarding interest rates and CD accounts.
Which bank gives 7% interest on savings accounts?
Although interest rates are high, interest on savings accounts has not yet reached 7%. However, several banks offer high-yield savings accounts over 5%.
How much can you make on a $10,000 CD?
On a $10,000 CD, your earnings depend on the interest rate and term of the CD. For example, with the national average interest rate of 1.81% for a 12-month CD, you could make approximately $182.51 over a year. However, if you find a CD with a 5% interest rate, you could earn $500 on the same investment.
How much does a $5,000 CD make in a year?
The earnings on a $5,000 CD over a year will also depend on the interest rate. For instance, at a 5% interest rate, a $5,000 CD would generate approximately $250 in interest over the course of a year.
Rates are subject to change; unless otherwise noted, rates are updated periodically. All other information on accounts is accurate as of April 3, 2024.
Virginia Anderson contributed to the reporting for this article.
This article originally appeared on GOBankingRates.com: How Much Does a $10,000 CD Make in a Year?
