How much will a $10,000 CD earn at today's lower rates?
If you've ever looked for a secure place to invest $10,000, a certificate of deposit (CD) account was likely one of your better options. In recent years, however, it's become an almost mandatory one. With inflation high and interest rates elevated in an attempt to tame it, rates on savings vehicles like CDs surged. While rates barely broke the 1% mark in 2020 and 2021, they surged past 5% in 2022 through much of 2024.
But that dynamic shifted again in the final months of last year. The Federal Reserve issued three interest rate cuts, combining for a reduction of a full percentage point lower than where the federal funds rate started in January 2024. And while that was welcome news for borrowers, it was less ideal for savers accustomed to earning high CD returns.
Still, it hasn't been a total loss either. Rates on CDs are still elevated, if not as ideal as they once were. And this can be clearly seen when crunching the returns on a $10,000 CD, using rates from last January and now. Below, we'll do the math – and show that a $10,000 CD can still be worth it for a wide swath of savers.
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How much will a $10,0000 CD earn at today's lower rates?
It can be difficult to determine exactly how CDs have been affected by the recent run of interest rate reductions. When examining these accounts through the lens of a $10,000 deposit, however, it becomes clearer (even if the returns are still substantial). Here, then, is what a $10,000 CD can now earn tied to some common terms and readily available interest rates:
6-month CDs
- 6-month CD in January 2024: $271.32 (at 5.50%)
- 6-month CD in January 2025: $227.90 (at 4.61%)
- Difference in interest earnings: $43.42
1-year CDs
- 1-year CD in January 2024: $566.00 (at 5.66%)
- 1-year CD in January 2025: $452.00 (at 4.52%)
- Difference in interest earnings: $114.00
3-year CDs
- 3-year CD in January 2024: $1,493.76 (at 4.75%)
- 3-year CD in January 2025: $1,329.96 (at 4.25%)
- Difference in interest earnings: $163.80
5-year CDs
- 5-year CD in January 2024: $2,521.56 (at 4.60%)
- 5-year CD in January 2025: $2,313.47 (at 4.25%)
- Difference in interest earnings: $208.09
As can be seen, the earning potential difference becomes stark as the CD term lengths increase. Still, if the returns available last January were appealing and beneficial for your financial circumstances, they haven't deteriorated so dramatically that they cease to be valuable. It's just important to note that these rates can and likely will change as the year progresses. And as demonstrated above, that may not be favorable for savers. Understanding this potential risk, then, many savers would be better served by locking in a high rate now while they still can.
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The bottom line
A $10,000 CD can still earn savers hundreds and possibly thousands of dollars, depending on the term, rate and lender. But it will require slightly more work to earn that return than it would have a few years ago. So consider shopping around now and thoroughly review your online bank options for opportunities to capitalize on today's elevated rates while they're still around. Since online banks tend to have lower operating costs than banks with physical locations, you may be able to secure a higher CD rate online, allowing you to take advantage of today's rate climate a bit longer than usual.
