Key Takeaways
- CDs are paying their highest rates in 20 years thanks to the Federal Reserve's aggressive inflation-fighting campaign.
- Opening a CD now allows you to guarantee one of today's record rates for months or years into the future.
- 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.
- CDs can also help you keep your money in savings, reducing the temptation of spending on unplanned purchases.
The Best CD Rates Have Skyrocketed in 2023
For the last 20 months, the Federal Reserve has been aggressively fighting decades-high inflation by repeatedly raising the federal funds rate. With 11 hikes, the Fed has increased its benchmark rate a cumulative 5.25%, to its highest level since 2001.
This has been great news for savers, as the federal funds rate directly impacts what banks and credit unions are willing to pay consumers for their deposits. And as a result, the rates you can earn on high-yield savings, money market, and CD accounts have surged to historic highs.
The remarkable gains have been seen across every CD term from 3 months to 5 years, but in the graph above, you can clearly see the path 1-year CD rates have taken since the Fed's first increase in March 2022. From just slightly above 1% at that time, the leading 1-year CD rate is now over 6%.
How CDs Work—And Why They're So Smart Right Now
Certificates of deposit (CDs) are a way for you to secure a higher rate than you might be able to earn from a savings or money market account—but also to lock in a rate that you'll be guaranteed for a set period of time. So when you open a CD, you're not only signing up for a known interest rate, but also a known time duration, or term.
What's great about this—particularly when rates are high, like they are now—is that your rate cannot go down. It's very possible the Fed will begin lowering its benchmark rate in 2024, and if it does so, rates on high-yield savings accounts and money market accounts will start to fall. But a CD rate you've locked in is yours to keep until the CD matures.
While it is possible CD rates could climb a bit higher still—if the Fed implements another rate hike—it's also possible the central bank is done with its increases and CD rates have already reached their peak. In any case, CDs are already a great move since rates are so elevated. And if they do move higher, it will likely be just a marginal increase.
How Much Can I Earn With $10,000 in a CD?
How much can you make by committing some of your money to a CD at today's rates depends, of course, on the term you choose and the particular CD you open. But using a common investment amount of $10,000, we show you below what you can earn by opening a top-paying CD in any of the major terms.
We've also shown how those earnings compare to a savings account paying 3% in order to help you understand what you stand to gain with a CD commitment. Granted, 3% is a hypothetical savings account rate—you may be earning more than that right now. But you may also be earning much less.
It's also important to consider that savings account rates will begin to drop when the Fed starts lowering interest rates. So earning 3% on a savings account now does not mean you'll earn that much in a year or two, or further down the road. Note, for example, that before the Fed started raising rates in 2022, the top nationwide rate on a high-yield savings account was just 0.70% APY.
Earnings on a $10,000 CD Opened at Today's Top Rates
| Top Nationwide Rate (APY) | Balance at Maturity | Total Earnings | Earnings Gain vs. a 3% Savings Account* | |
|---|---|---|---|---|
| 6 months | 5.76% | $ 10,288 | $ 288 | + $ 138 |
| 1 year | 6.18% | $ 10,618 | $ 618 | + $ 318 |
| 18 months | 5.80% | $ 10,887 | $ 887 | + $ 432 |
| 2 year | 5.60% | $ 11,151 | $ 1,151 | + $ 542 |
| 3 year | 5.50% | $ 11,742 | $ 1,742 | + $ 815 |
| 4 year | 5.20% | $ 12,248 | $ 2,248 | + $ 993 |
| 5 year | 5.25% | $ 12,915 | $ 2,915 | + $ 1,323 |
Only Have $5,000 or Less for a CD? Or Maybe More?
Maybe $10,000 is more savings than you can afford to commit, and $2,000 or $5,000 is more your speed. Or maybe you have a bigger amount—like $25,000—to invest. Below we've laid out the earnings you could expect at those different deposit amounts.
Earnings on Different CD Amounts at the Top Nationwide Rates
| Top Nationwide Rate (APY) | Total Earnings on a $2,000 CD | Total Earnings on a $5,000 CD | Total Earnings on a $25,000 CD | |
|---|---|---|---|---|
| 6 months | 5.76% | $ 58 | $ 144 | $ 720 |
| 1 year | 6.18% | $ 124 | $ 309 | $ 1,545 |
| 18 months | 5.80% | $ 177 | $ 443 | $ 2,217 |
| 2 year | 5.60% | $ 230 | $ 576 | $ 2,878 |
| 3 year | 5.50% | $ 348 | $ 871 | $ 4,356 |
| 4 year | 5.20% | $ 450 | $ 1,124 | $ 5,620 |
| 5 year | 5.25% | $ 583 | $ 1,458 | $ 7,289 |
CDs Have a Catch—But You Can Use It to Your Advantage
There is one important trade-off to CDs—they carry an early withdrawal penalty that you'll incur if you decide you need to cash out before the CD's maturity date. Sometimes these are relatively mild, but sometimes they're quite harsh. Since every bank and credit union has their own policy, be sure you find out how any penalty will be calculated before you commit to a CD. And if two CDs are fairly similar on rate, go with the one that has a less onerous penalty.
There is a silver lining to early withdrawal penalties, however. Because cashing out early will cost you, it can be an effective deterrent to spending your savings on something you didn't previously plan for. So if you choose your CD term carefully, keeping your money on deposit until maturity will not only help you keep your money saved, but it will also maximize what you earn on those savings.
Best CD Rates for April 2024: Up to 5.65%
Best High-Yield Savings Accounts for April 2024—Up to 5.50%
Best Money Market Account Rates for April 2024—Up to 5.35%
Rate Collection Methodology Disclosure
Every business day, Investopedia tracks the rate data of more than 200 banks and credit unions that offer CDs and savings accounts to customers nationwide and determines daily rankings of the top-paying accounts. To qualify for our lists, the institution must be federally insured (FDIC for banks, NCUA for credit unions), and the account's minimum initial deposit must not exceed $25,000.
Banks must be available in at least 40 states. And while some credit unions require you to donate to a specific charity or association to become a member if you don't meet other eligibility criteria (e.g., you don't live in a certain area or work in a certain kind of job), we exclude credit unions whose donation requirement is $40 or more. For more about how we choose the best rates, read our full methodology.
Article Sources
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Federal Reserve Board. "Open Market Operations."
