Certificates of deposit (CDs) are all the rage among savers right now. With CD rates on all terms still hovering between 4% and 5.5%, many people have a unique opportunity to lock in a competitive APY before rates start to drop. For those who have higher sums to invest, like $20,000, a CD could yield a hefty amount over long periods -- some even paying out $1,000 annually. If you have $20,000 to invest, let's take a look at how much interest a CD could generate for you.
A $20,000 initial deposit could yield roughly $4,700, depending on the term
First off, keep in mind that the longer your CD term, the more you stand to gain on CD interest. That's because CDs -- at least those offered by banks -- grow by compound interest. As your initial deposit sprouts interest, that interest is added back to the pot, thus producing more interest at an accelerated pace. With that in mind, here's how much you could earn on different CD terms with a $20,000 deposit.
| CD term | APY | Yield on $20,000 |
|---|
| 1-year Sallie Mae CD | 5.25% | $1,050 |
| 2-year Bread Financial CD | 4.65% | $1,903.24 |
| 3-year Quontic CD | 4.40% | $2,757.86 |
| 4-year Bread Financial CD | 4.15% | $3,532.45 |
| 5-year Quontic CD | 4.30% | $4,686.05 |
Data source: Author's calculations; CD issuers. CD rates are current as of May 8, 2024.
Now, if you didn't want to invest in long-term CDs (those that have a maturity longer than 12 months), you could also invest in short-term CDs. Here's how much you could earn on some of the top short-term CDs on the market today.
| CD term | APY | Yield on $20,000 |
|---|
| 3-month Banc of California CD (via Raisin) | 5.28% | $258.93 |
| 6-month Quontic CD | 5.05% | $498.78 |
| 8-month Southwestern National Bank (via Raisin) CD | 5.22% | $690.08 |
Data source: Author's calculations; CD issuers. CD rates are current as of May 8, 2024.
Although short-term CDs technically have higher rates right now, there's no guarantee that the same rate (or a similar one) will be available when the term ends. You might snag 5.22% on an 8-month CD. But eight months from now, the interest rate environment could look very different. If you wanted to renew your term and ongoing rates for, say, a 1-year CD fell to 4%, you might have been better off getting a 2-year CD to begin with.
All in all, if you have $20,000 to deposit in a CD, you could still earn a decent amount of interest on any of the best CDs. Just be diligent with your CD shopping, as you don't want to lock into a rate that's lower than others for the same term. Take a look at our list of the best CDs to see which rates are competitive and look into one before they start to drop.
These savings accounts are FDIC insured and could earn you 11x your bank
Many people are missing out on guaranteed returns as their money languishes in a big bank savings account earning next to no interest. Our picks of the best online savings accounts could earn you 11x the national average savings account rate. Click here to uncover the best-in-class accounts that landed a spot on our short list of the best savings accounts for 2024.
FAQs
A $20,000 initial deposit in a CD could yield between $260 and $4,700, with longer terms paying out significantly more. Short-term CDs have higher APYs, but long terms could guarantee high interest rates for a longer period.
How much does a 20,000 CD make in a year? ›
That said, here's how much you could expect to make by depositing $20,000 into a one-year CD now, broken down by four readily available interest rates (interest compounding annually): At 6.00%: $1,200 (for a total of $21,200 after one year) At 5.75%: $1,150 (for a total of $21,150 after one year)
How much interest will I earn on $20,000 dollars? ›
$20,000 in savings accumulates this much in interest
| Bank account type | Interest earned after one year |
|---|
| Savings Account, 0.01% APY | $2.00 |
| High-Yield Savings Account, 4.50% APY | $900 |
Aug 15, 2023
Earnings on a $10,000 CD Over Different Terms
| Term Length | Average APY | Interest earned on $10,000 at maturity |
|---|
| 1 year | 2.59% | $262.10 |
| 18 months | 2.22% | $338.29 |
| 2 years | 2.08% | $424.40 |
| 3 years | 1.94% | $598.77 |
3 more rows5 days ago
The best 1-year CDs could earn $2,625 in interest on $50,000. The best 2- to 5-year CDs could earn between $2,250 and $2,375 in interest on $50,000 per year.
Is a CD a good way to make money? ›
A certificate of deposit (CD) is a low-risk savings tool that can boost the amount you earn in interest while keeping your money invested in a relatively safe way. Like savings accounts, CDs are considered low risk because they are FDIC-insured up to $250,000.
How much can I make if I put 5000 in a CD? ›
The best rates on a CD today that accept a $5,000 deposit range from 4.70% to 5.50% APY, depending on the term and minimum deposit. Putting $5,000 away in the 2-year CD with a rate of 5.25% could result in close to $500 in interest.
Why should you put $15000 into a 1-year CD now? ›
Unlike traditional or high-yield savings accounts, which have variable APYs, most CDs lock your money into a fixed interest rate the day you open the account. That's why if you suspect that interest rates will soon drop, it can be a good idea to put money in a CD to preserve the high APY you would earn.
Why should you deposit $10,000 in CD now? ›
The top nationwide rate in each CD term—from 6 months to 5 years—currently ranges from 5.20% to 6.18% APY. With a $10,000 investment in a top-paying CD, you can earn hundreds to thousands of dollars of interest on your money—and much more than if you keep it in a typical savings account.
What is the biggest negative of putting your money in a CD? ›
Banks and credit unions often charge an early withdrawal penalty for taking funds from a CD ahead of its maturity date. This penalty can be a flat fee or a percentage of the interest earned. In some cases, it could even be all the interest earned, negating your efforts to use a CD for savings.
Key takeaways. Interest earned on CDs is considered taxable income by the IRS, regardless of whether the money is received in cash or reinvested. Interest earned on CDs with terms longer than one year must be reported and taxed every year, even if the CD cannot be cashed in until maturity.
How much does a 25,000 CD earn in a year? ›
That being said, here's what you can expect to earn with varying rates for a 1-year (short-term) CD: 7.00% APY: $1,750 for a total of $26,750 after 12 months. 6.50% APY: $1,625 for a total of $26,125 after 12 months. 5.75% APY: $1,437.50 for a total of $26,437.50 after 12 months.
Who has the highest paying CD right now? ›
Best 1-Year CD Rates
- Abound Credit Union – 5.25% APY.
- Mountain America Credit Union – 5.25% APY.
- KS State Bank – 5.25% APY.
- Forbright Bank – 5.25% APY.
- Merchants Bank of Indiana – 5.25% APY.
- Seattle Bank – 5.25% APY.
- Bread Savings – 5.25% APY.
- Utah First Credit Union – 5.25% APY.
Current national average CD rates
| Term | National average rate |
|---|
| 6-month CD | 1.79% APY. |
| 1-year CD | 1.80% APY. |
| 3-year CD | 1.42% APY. |
| 5-year CD | 1.40% APY. |
1 more rowMar 21, 2024
Find current CD rates and recent interest rate trends from Bankrate below. Here are the current national average annual percentage yields (APYs) for this week, according to Bankrate's most recent survey: 1-year CD yield: 1.85 percent APY. 3-year CD yield: 1.44 percent APY.
How much interest does $50,000 earn in a year? ›
CDs offer a fixed interest rate for a set term, while high-yield savings accounts provide more flexibility. The interest you can earn on $50,000 in one year can range from $2,125 to $3,000 depending on the interest rate.
Can you get 6% on a CD? ›
It is possible to get a 6% certificate of deposit, but these sought-after savings rates won't be available at every bank. In fact, no banks currently offer a 6% CD. However, several credit unions advertise 6% interest rates on certificates of deposit.
