CD Investments: How Much You Can Earn
Certificates of deposit can be thought of as smart investments for some of your money when low risk is a priority. A CD investment offers guaranteed returns and your money remains federally insured. The amount of interest you can earn on a CD depends on the rates, which are falling in the current rate environment. Find out what the best CDs can earn below.
Compare the best CD rates
Find out which banks and credit unions currently offer high yield CDs.
Compare two CDs
Calculate the interest you would get from two different CDs. To see how important the rates are, keep the same deposit and maturity terms and note how the interest rate would affect your overall savings.
Here is an example. If you invested $ 10,000 in a five-year CD at 0.30% APY, which is close to the national average rate, you would have earned around $ 150 in interest after five years.
Now let’s try a maximum rate in an online bank. If you invested the same $ 10,000 in a five-year 0.80% CD, your account looks better with $ 406 earned in interest, a difference of over $ 250. (See rates equal to or greater than 0.70% APY on our list of best five-year CDs.)
Average CD prices
CD rates vary widely even within the same bank or credit union, but here’s a general trend: the longer the term, the higher the rate. In other words, when you sacrifice access to your money for longer, you earn more interest. Some financial institutions also reward you with higher rates in exchange for higher minimum deposits. A CD that requires $ 5,000 to open an account can earn more than a CD that requires $ 1,000. (If you’re torn between the short and the long term, think Three year CD instead of.)
Current average CD rates
Best CD rates
If you shop around, you can find CDs that are priced more than double the national average. Online banks tend to have the highest rates, followed by credit unions and traditional banks.
»Ready to see more? Check out our list of highest CD rates available this month.
Comenity Direct CD
Discover CD Bank
Why should I consider CDs?
They are safe. Like savings accounts, CDs are federally insured to protect your money, both in online and traditional banks as well as in credit unions. This means that they present minimal risk, whereas investing in the stock market – another option for making your money grow – is more unpredictable and can lead to losses, especially in the short term. Learn more about CD Security.
But CDs have an opportunity cost. The typical CD has a fixed rate, so once you lock in your money for months or years, you close the door to higher rates that might appear. (Not ready for a long engagement? See the best one-year CDs or, if you are aiming for an even shorter time frame, the best semi-annual rates.)
At the end of the line : CDs might be right for you if you want to avoid risky investments and have saved money that you won’t need for a while. (If, on the other hand, access is a priority, check out NerdWallet best savings accounts.)
Comenity Direct CD
Discover CD Bank
How to have CDs and flexibility
If you’re trying to decide between a CD and something less restrictive, there is an intermediate option: CD scales. This is a savings strategy in which you open CDs of different lengths. A common scenario is to open five CDs, with terms of one year, two years, three years, four years and five years. The goal is to have a CD maturing each year to give you the ability to reinvest or cash out each time. If it’s appealing, explore learn more about CD scales or consult an explanation on three different CD investment strategies.