How much does a $1,000 CD make in a year?
With interest rates significantly higher than at the start of this year, it may seem like there aren't many beneficial financial options currently available. And there generally aren't — although there are still some worth exploring.
Because of the elevated rate environment, the earnings savers can secure with high-yield savings and certificates of deposit (CD) accounts, for example, are substantial. Regular savings accounts come with an average interest rate of just 0.46% currently — but rates on some of the top earning high-yield and CD accounts are many times higher.
With that understanding, it helps to know exactly how much savers can stand to make with a CD at today's top rates. Start by exploring your CD account options here to see how much you could be earning now.
How much does a $1,000 CD make in a year?
Unlike both regular and high-yield savings accounts, which let users deposit and withdraw from their accounts as they like, to get the full interest on a CD you'll need to leave your money untouched for the full CD term or time duration. But with rates on short-term CDs (12 months or less) high right now, the incentive to reap big rewards should offset the temptation to withdraw your money early (plus, you'll get penalized for doing so).
That all said, here's how much a $1,000 CD will make in a year, based on four possible interest rate scenarios:
- At 6.00%: $60 (for a total of $1,060 total after one year)
- At 5.75%: $57.50 (for a total of $1,057.50 total after one year)
- At 5.50%: $55 (for a total of $1,055 total after one year)
Obviously, the more you deposit into one of these high-earning CDs, the more you'll make over a year. Look at how those numbers creep up when depositing $2,500 instead:
- At 6.00%: $150 (for a total of $2,650 after one year)
- At 5.75%: $143.75 (for a total of $2,643.75 after one year)
- At 5.50%: $137.50 (for a total of $2,637.50 after one year)
And here's what you'd make with a $5,000 deposit:
- At 6.00%: $300 (for a total of $5,300 after one year)
- At 5.75%: $287.50 (for a total of $5,287.50 after one year)
- At 5.50%: $275.00 (for a total of $5,275 after one year)
Crunch the numbers and see how much you can make with a CD here now.
Other considerations
A higher interest rate isn't the only benefit of opening a CD now, even if it is the most obvious one. CDs are also safe, as they're FDIC-insured up to $250,000 per account, per lending institution. While you're unlikely to deposit that much into a CD, it can provide some peace of mind, particularly following the string of bank failures earlier this year.
Because of the way they're structured, however, CDs can also be a reliable way to safeguard against what otherwise may have been impulse purchasing on your end. With a hefty penalty on the other side of any withdrawal, a CD can also protect against an endless cycle of deposits and withdrawals, letting your funds grow unbothered at that higher rate.
The bottom line
The more you deposit into a CD, the more you'll make. But with today's CD rates the highest they've been in years, you don't have to deposit a lot to make a substantial return. Even a $1,000 deposit could earn you significantly more money than you would have received with a regular savings account. And if you deposit more — or if you shop around for the highest rates — you can potentially earn even more. In an economy where higher interest rates have left Americans with few appealing options, a CD is one of the better alternatives. Just don't lose your window of opportunity. Get started with a one-year CD here now.
