How much will a $5,000 CD make in a year?
Right now, there are many experts touting the benefits of investing in a certificate of deposit (CD) — and for good reason. Today's high interest rate environment equates to the potential for large returns on these savings vehicles.
But what does it mean for your wallet? For example, how much money will you make if you open a 1-year CD with $5,000? Let's do the math and find out.
Lock in today's high CD returns now.
How much will a $5,000 CD make in a year?
The amount of money you'll earn on a $5,000 CD varies based on the rate offered by the financial institution you open your account with, and some offer much higher rates than others. For example, brick-and-mortar banks have additional overhead costs when compared to online banks.
As a result, online banks typically offer better APYs, as they're able to pass the savings on to their customers. If you plan on opening a CD, online banks are a great place to start comparing your options.
Three of the highest-return 1-year CDs right now are available from Popular Direct, LendingClub Bank and CIBC Bank USA. Here's how much money you can expect to earn on a $5,000 CD from each institution after a year (CD rates are current as of November 6, 2023):
- Popular Direct at 5.67%: $283.50 (for a total of $5,283.50 after one year)
- LendingClub Bank at 5.65%: $282.50 (for a total of $5,282.50 after one year)
- CIBC Bank USA at 5.62%: $281.00 (for a total of $5,281.00 after one year)
It's important to remember that what you earn with a CD is relative to the amount of money you invest. You don't have to have $5,000 to invest to generate meaningful returns, though. Here's what a $1,000 CD at each of these institutions would earn over the course of a year:
- Popular Direct at 5.67%: $56.70 (for a total of $1,056.70 after one year)
- LendingClub Bank at 5.65%: $56.50 (for a total of $1,056.50 after one year)
- CIBC Bank USA at 5.62%: $56.20 (for a total of $1,056.20 after one year)
Open a CD today to lock in a top rate today.
Other reasons to open a CD
Today's CD return rates are impressive, but that's not the only reason you should consider opening one. There are several other potential perks to consider, including:
- Locked-in rate: CDs don't just give you a way to tap into today's high interest rates. They "also offer a fixed interest rate for the entire term, providing a predictable and stable source of income," says Cameron Burskey, senior partner at Cornerstone Financial Services in Southfield, Michigan. So, you'll continue earning today's high returns throughout your CD term even if interest rates fall.
- Savings discipline: When you open a CD, you agree to keep your money in the account for the entire term. If you access the money early, you may have to pay a penalty for early withdrawal. This can help create more disciplined savings habits.
- Safety: Most CDs are NCUA- or FDIC-insured. That means if the bank can't afford to pay you back as agreed, that insurance will cover the money you deposited (up to $250,000 per account, per depositor limits).
- No fees: CDs don't typically come with monthly maintenance fees.
Open a CD now to enjoy safe, stable returns with no fees.
The bottom line
CDs give you a way to turn today's high interest rate environment into a big return on the money you deposit. With today's rates as high as they are, it makes sense in many to lock in a rate on a CD now.
