Savers can expect a return worth hundreds of dollars if they open a $10,000 1-year CD account this month.
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Transferring any meaningful amount of money into a certificate of deposit (CD) account, which will require temporary loss of access to the funds, may not sound appealing to savers right now. After all, with inflation surging, market uncertainty pronounced and the potential for an interest rate hike later this year, flexibility is a concern for many. And that's especially true when there's a five-figure amount of money at stake such as $10,000. At the same time, CD interest rates remain competitive this month and there are select terms that will allow you to earn that rate without being so prohibitive as to prevent you from pivoting your savings strategy relatively soon.
A 1-year CD account, for example, comes with interest rates around 4% right now. But with a maturity date on the calendar for next summer, you'll still be able to shift your savings approach relatively quickly. In the interim, you'll grow your interest, protect your principal and enjoy the protection FDIC insurance offers on all accounts worth up to $250,000. In other words, a $10,000 1-year CD account could be the right choice for your money right now. Prior to making a deposit, however, it's critical to understand the interest-earning capacity of an account of this amount and length.
Thanks to the CD's fixed interest rate – which won't change for the full term – this is simple to calculate with precision. Below, we'll crunch the numbers.
Start by seeing how much interest you could be earning with a CD account here.
How much interest will a $10,000 1-year CD account earn now?
The top 1-year CD rates range from 4.10% to 4.15% this July, though savers may be able to track down slightly higher rates if they take the time to shop around online. Here's how much interest a $10,000 deposit can earn over the next year, calculated against both rates and the assumption that no early withdrawal penalties or fees are levied against the account:
- $10,000 1-year CD at 4.10%: $410.00 upon maturity
- $10,000 1-year CD at 4.15%: $415.00 upon maturity
Savers stand to earn around $410 over the next year with a CD account of this size, or more than $1 per day, every day, for a full year. And that interest will be reliable and guaranteed in a way that it won't be with variable-rate alternatives like high-yield savings and money market accounts. By next summer, savers will likely also have a clearer idea of what they should be doing (and not be doing) with their money and they'll have more than $400 tacked on to their principal to move around at that point.
Lock in a high CD interest rate online today.
How much interest will a $10,000 high-yield savings account earn over the next year?
At a top rate of 4.10% now, interest earnings with a high-yield savings account over the next year with the same amount deposited will look around the same as they would with one of the CD accounts outlined above. The high-yield savings account, however, has something the CD doesn't: a variable interest rate. While a variable rate may be detrimental in a cooling interest rate climate, that's not the landscape savers find themselves in now.
With higher interest rates expected to hold for the foreseeable future and potentially even rise if inflation continues to increase, savers can theoretically earn more with the high-yield savings account than they would with a CD over the next year, should rates tick up over the next 12 months. That noted, the variable rate could also decline, at which point the CD will still be earning interest at the rate you lock in now. Weigh both accounts carefully, then, to determine which fits your broader savings strategy the best.
The bottom line
Between $410 and $415. That's how much a $10,000 1-year CD account will earn savers now, calculated against readily available rates. But with similar earnings available with a high-yield savings account with fewer restrictions, savers will want to closely evaluate that alternative, too. Whatever is ultimately decided, however, it will be critical to keep the money saved in a traditional savings account limited as the average 0.38% rate that account comes with essentially equates to a financial loss compared to what can easily be obtained with either of these account alternatives.
Edited by Angelica Leicht
