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 | 4.60% | $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 | 5.10% | $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.
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 interest will I earn on $20,000? ›
The best certificates of deposit (CDs) and savings accounts are paying well above 5.00% APY. Earning 5.00% APY on $20,000 in savings would generate $1,000 in interest within a year. Since many of the best savings accounts are earning more than 5.00%, you could get slightly more for your money.
How much does a $10,000 CD make in a year? ›
Earnings on a $10,000 CD Over Different Terms
| Term Length | Average APY | Interest earned on $10,000 at maturity |
|---|
| 6 months | 2.53% | $127.17 |
| 1 year | 2.57% | $260.05 |
| 18 months | 2.18% | $332.10 |
| 2 years | 2.09% | $426.48 |
3 more rowsAug 8, 2024
The important thing to notice is that your interest gets larger every year, since there is more money in your account over time. Thanks to today's elevated CD interest rates and the effects of compounding, our hypothetical 5-year CD earned $2,166.53 in the five-year period. Not bad for a risk-free investment.
How much does a $5000 CD make in a year? ›
Today's top CD rates by term
| CD term | Institution offering top APY | Estimated earnings on $5,000 with top APY |
|---|
| 1-year | Bread Savings | $255 |
| 18-month | Bask Bank | $372 |
| 2-year | Bask Bank | $486 |
| 3-year | TAB Bank | $681 |
5 more rows2 days ago
Investing in assets like stocks, bonds, ETFs, real estate funds, and savings accounts is a way to passively make more money. You can put your hard-earned savings to work for you, and after holding those investments for many years, your chances of turning a profit increase dramatically.
How much will $20,000 be worth in 10 years? ›
As you will see, the future value of $20,000 over 10 years can range from $24,379.89 to $275,716.98.
How much does a 20,000 CD make in a year? ›
APY = Annual Percentage Yield. APYs are subject to change at any time without notice. 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.
What is the biggest negative of putting your money in a CD? ›
The biggest risk to CD accounts is usually an interest-rate risk, as federal rate cuts could lead banks to pay out less to savers. 7 Bank failure is also a risk, though this is a rarity.
Why should you deposit $10,000 in CD now? ›
One of the most compelling reasons to put $10,000 into a long-term CD investment now is the current state of interest rates. CD rates remain at levels we haven't seen in years, and many financial institutions are offering rates of 4% to 5% or more on their long-term CDs.
The risk of having a CD is very low. Unlike how the stock market or a Roth IRA can lose money, you typically cannot lose money in a CD. There is actually no risk the account owner incurs unless you withdraw money before the account reaches maturity.
Can you leave money in a CD after it matures? ›
Bottom Line. If you have a CD approaching its maturity date, start planning now for what you want to do next with that money. If you wish, you can leave the money alone and let the CD renew automatically for the same term at the current APY.
What is the catch with putting your money in a CD? ›
If interest rates fall before the CD expires, the bank is out of luck and must give you the rate it quoted. If rates climb, you're stuck with the lower rate you agreed to when you opened the account. And if you take your money out before a CD matures, you'll pay a penalty -- typically three months of interest.
Who has the highest paying CD right now? ›
CDs shown below are from banks with the highest star ratings.
- Barclays. Our Score 4.3. APY 5.10% ...
- Quontic Bank. Our Score 4.5. ...
- Ally Bank. Our Score 4.6. ...
- Marcus by Goldman Sachs. Our Score 4.5. ...
- BMO Alto. Our Score 4.3. ...
- Marcus by Goldman Sachs. Our Score 4.5. ...
- Alliant Credit Union. Our Score 4.2. ...
- Alliant Credit Union. Our Score 4.2.
Know a CD's minimum. CDs have a typical minimum balance or opening requirement that's often around $1,000, but it can range from $0 to $10,000. There are jumbo CDs with minimums traditionally around $100,000, though these CDs don't necessarily have the best rates in the industry.
How much will a $10,000 dollar CD earn? ›
The national average APY for a one-year CD is 1.74 percent, based on Bankrate research, which shows this average has increased or remained the same since March 2022. If you deposited $10,000 into a one-year CD that pays this national average rate of 1.74 percent, in one year it would be worth a total of around $10,174.
Is $20,000 dollars in savings good? ›
Depositing $20,000 in a savings account is wise when you have a plan for the money, such as a near-term expense or rainy day fund. For long-term goals, like retirement, you might be better served by opening a brokerage account or certificate of deposit (CD).
How much is 5 percent interest on $20,000? ›
For example, if you take out a five-year loan for $20,000 and the interest rate on the loan is 5 percent, the simple interest formula would be $20,000 x .05 x 5 = $5,000 in interest.
How much will $10,000 make in a high-yield savings account? ›
If you put $10,000 into a high-yield savings account with a 5.00% APY, you'll make $500 in interest in a year. If you deposit $10,000 into a high-yield savings account with a 5.00% APY at age 20, you'll earn nearly $80,000 in interest by the time you turn 65.
How much interest does $10 000 earn in a year? ›
If you put $10,000 into a high-yield savings account, you can earn from $300 to $420 in a year — assuming your variable high-yield savings rate remains above 3.00%. Several banks are offering rates between 4.35% to 5.27% APY.
