Key Takeaways
- CD rates soared to their highest levels in over 20 years due to the Federal Reserve’s aggressive inflation-fighting measures.
- While rates have slightly declined from their peak, CDs still offer historically high yields, ranging from 4.70% to 5.65% APY.
- Investing $10,000 in a top-paying CD can yield hundreds or even thousands of dollars in interest, surpassing typical savings account returns.
- Opening a CD now can secure today’s exceptional rates for months or years, shielding you from potential drops in savings account yields when the Fed reduces rates.
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Today’s CD Rates Aren’t Far Below Their Historic Peak
Between March 2022 and July 2023, the Federal Reserve aggressively combat high inflation by raising the federal funds rate 11 times, resulting in a cumulative 5.25% increase—its highest level since 2001.
This move has been advantageous for savers, as it directly impacts the rates offered on high-yield savings, money market, and CD accounts, which peaked last fall.
While the central bank has maintained the benchmark rate since July, future rate hikes are unlikely. Consequently, banks and credit unions have marginally reduced CD rates in recent months.
Despite the slight decrease, CD rates remain significantly high, offering better returns compared to the past two decades.
Why CDs Are So Smart Right Now
CDs allow you to lock in a guaranteed rate for a specific period, shielding you from potential rate drops, especially during times of elevated rates like the present.
Locking in high yields ensures predictability and hedges against future Fed rate cuts, expected this year, which could impact other high-yield accounts.
When the Fed lowers rates, returns on high-yield accounts may decrease. However, the rate on your locked-in CD remains constant until maturity.
How Much Can I Earn With $10,000 in a CD?
Your earnings from a $10,000 CD depend on the chosen term and CD type. The table below illustrates potential earnings compared to a 3% savings account rate.
Considering historical savings account rates, CDs offer substantial earning potential and shield against potential rate reductions.
Earnings on a $10,000 CD Opened at Today’s Top Rates
| Term | Top Nationwide Rate (APY) | Balance at Maturity | Total Earnings | Earnings Gain vs. a 3% Savings Account* |
|---|---|---|---|---|
| 6 months | 5.55% | $10,278 | $278 | +$128 |
*A 3% savings account rate is hypothetical and subject to change, unlike a fixed CD rate.
Only Have $5,000 or Less for a CD? Or Maybe More?
Whether you have $2,000, $5,000, or $25,000 to invest, the table showcases the projected earnings at different deposit amounts.
CDs Have a Catch—But You Can Use It to Your Advantage
While CDs bear early withdrawal penalties, they deter impulsive spending and ensure your savings grow until maturity. It’s advisable to understand the penalties before committing to a CD.
By carefully selecting the CD term, you maximize your savings and earnings, leveraging the penalty as a saving tool.
Best CD Rates for June 2024: Up to 5.51%
Best High-Yield Savings Accounts for June 2024—Up to 5.55%
Best Money Market Account Rates for June 2024—Up to 5.35%
How We Find the Best Savings and CD Rates
Investopedia analyzes data from over 200 banks and credit unions, identifying the top-paying accounts daily. Institutions must be federally insured, and account minimums shouldn’t exceed $25,000 to make the list.
To ensure inclusivity, banks should be accessible in at least 40 states. Credit unions with donation requirements exceeding $40 are excluded. For a detailed methodology, refer to our comprehensive guide.