Is a $10,000 1-year CD worth opening for 2025?
While certificate of deposit (CD) accounts had little worth to savers in 2020 through much of 2022, they reversed course after the Federal Reserve embarked on an interest-rate hike campaign. Designed to battle a sharp rise in inflation, the Fed raised interest rates numerous times to tame that spike, resulting in significantly higher costs to borrowers but substantially higher returns for savers with CDs and high-yield savings accounts. But the Fed issued three interest rate cuts in the final months of 2024. And inflation is now under 3% – significantly lower than where it was in June 2022, for example, when it sat over 9%.
This change in economic policy has led some savers to reconsider their approach, particularly now that returns on CDs aren't quite as advantageous. But that doesn't mean that they're not still valuable, either. It just may require a deposit in the right amount for the right term (or length) for savers to realize significant value. And that could mean a $10,000 deposit into a 1-year CD now. Below, we'll detail three big benefits of opening this type of CD for 2025.
See how much more you could earn on your money with a top CD here.
Is a $10,000 1-year CD worth opening for 2025?
While every saver's financial situation differs, there's a compelling case to be made for opening a $10,000 1-year CD this January. Here's why:
You can earn hundreds of dollars
CD interest rates aren't what they were a few years ago but they're still relatively high. A 1-year CD comes with a rate of 4.52% right now, approximately. That's $452.00 earned on a $10,000 deposit – or 976% better than the minimal $42 you'd earn with the same deposit in a traditional savings account. With interest rates on the latter under 1%, it makes sense to transfer these funds into a high-earning CD instead. And it makes sense to do so now, while rates on CDs are still high. Additional rate cuts to come in 2025 will lead to reduced earnings on these accounts, so it's beneficial to act quickly.
Get started with a top CD online today.
It will protect your savings
A CD interest rate is fixed, meaning that no matter what happens in the broader rate climate, you'll earn the same rate you opened the account with. This could be considered a drawback when rates are continually being hiked as it won't allow you to take advantage of higher rates in the same way a high-yield savings account would. But in today's climate in which multiple interest rate cuts have already been issued and additional ones look likely for the first half of 2025, it's beneficial to lock in a high rate now – and the returns that come with that high rate – thus protecting your savings in an otherwise declining rate climate.
It will give you flexibility
A 1-year CD allows you to weather any economic uncertainty to come over the next 12 months while still giving you the flexibility to move those funds without penalty once the account has matured. A long-term CD, meanwhile, with terms ranging from 18 months to multiple years, won't come with that same ease. If you want to withdraw your funds from one of those accounts before the account has matured you'll need to pay an early withdrawal penalty to do so. A 1-year CD, by comparison, will offer you short-term protection and the ability to change your mind without penalty if you find a better alternative next January.
The bottom line
A $10,000 deposit into a 1-year CD this month can give savers a unique combination of a high return and protection against 2025's unknown economic conditions. And it will provide the flexibility to move those funds elsewhere much sooner than other, long-term CD counterparts can. But it's critical to ensure that the $10,000 deposit can be maintained for the full 12 months to avoid any penalties, thus voiding the benefits of this unique savings vehicle right now.
