How much interest would an 18-month CD earn now?
Certificates of deposit (CD) accounts are often an effective way to grow your money with no inherent risk. To do so effectively, however, requires some strategic input on behalf of the saver. This involves depositing the right amount with the highest rate for the best term, or length of the account. The latter consideration is critical to get right as premature access to the money deposited will frequently lead to an early withdrawal penalty.
Historically, long-term CDs had higher rates to entice savers to keep their money with the lender for an extended period. But, right now, rates on both short-term and long-term CDs are similarly high. In this unique climate, then, when inflation is cooling and interest rate cuts appear imminent, a long-term CD like an 18-month account could be best for many savers. Not only will they lock in a high rate, but they'll also gain some flexibility when their CD matures much earlier than long-term counterparts with lengths of multiple years.
Before getting started, however, savers should know exactly how much they stand to earn with this type of account. And because rates on CDs are locked (unlike other accounts with variable rates), it's easy to determine exactly how much interest an 18-month CD can earn now.
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How much interest would an 18-month CD earn now?
18-month CD interest rates range between 4.50% and 5.00% right now. But that could soon change if inflation continues to decline and the Federal Reserve responds with a reduction to its federal funds rate.
That understood, here's how much interest you could earn on this CD account today, calculated with three available interest rates and six different opening deposits:
- $500 deposit: $34.13 (at 4.50%), $36.04 (at 4.75%) and $37.96 (at 5.00%)
- $1,000 deposit: $68.25 (at 4.50%), $72.09 (at 4.75%) and $75.93 (at 5.00%)
- $2,500 deposit: $170.63 (at 4.50%), $180.22 (at 4.75%) and $189.82 (at 5.00%)
- $5,000 deposit: $341.27 (at 4.50%), $360.45 (at 4.75%) and $379.65 (at 5.00%)
- $10,000 deposit: $682.54 (at 4.50%), $720.90 (at 4.75%) and $759.30 (at 5.00%)
- $20,000 deposit: $1,365.08 (at 4.50%), $1,441.79 (at 4.75%) and $1,518.60 (at 5.00%)
So, with this type of CD, you can earn between $34.13 and $1,518.60 right now, depending on the amount deposited and the rate secured. Considering that the average rate on a traditional savings account is just 0.45% right now, it makes sense to get started with an 18-month CD instead, especially while these rates are still high.
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What about high-yield savings accounts?
High-yield savings accounts have also been an attractive option for many in recent years thanks to the elevated rate climate. While rates on the best high-yield savings accounts aren't quite as high as the best CD accounts, they're still worth considering now, especially because savers won't have to lock their money away to earn that rate. High-yield savings accounts operate just like their regular counterparts, albeit with a higher return.
That noted, rates on these accounts are variable and will fall as the rate climate adjusts downward. CDs won't. But if the accessibility is more important to you then it's still a viable option to explore.
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The bottom line
If you want to earn a top CD interest rate but don't want to worry about keeping your money locked away for years, an 18-month CD could be right for you. By opening one now, you could earn hundreds and potentially thousands of dollars, depending on the initial deposit amount. But with high-yield savings accounts also offering competitive rates now — and a declining rate climate seemingly on the horizon — you should start calculating your potential earnings right away and consider being proactive. Today's rates, no matter the selected CD term, are unlikely to remain this high for much longer.
