KEY POINTS
- A $10,000 deposit will get you past the requirements of most CDs, including high-yield accounts with 5% (or higher) APYs.
- The national average for 6-month CDs is a paltry 1.49%, but you can beat that by doing your research.
- Consider a high-yield savings account over a CD if you need continuous access to your money.
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Although you shouldn't tie up your emergency fund, a certificate of deposit, or CD, can be excellent ways to grow your mid-term savings. For instance, if you're saving up for a house down payment, a CD can help you grow the money while keeping it available on your timeline.
Some of the top CDs have high minimum deposits, but $10,000 will pass muster for the vast majority of them. You'll still need to do a bit of exploration to find the best rates, however, but it can really pay off. Let's look at the numbers.
High-yield 6-month CDs
At the high end of the spectrum, I've seen many great offers for 6-month CDs in the 4.5% to 5.5% range. With a $10,000 deposit, here's what you'd earn by the end of the term depending on the specific annual percentage yield (APY):
| APY | 4.50% | 4.75% | 5% | 5.25% | 5.50% |
|---|---|---|---|---|---|
| End balance | $10,227.12 | $10,239.86 | $10,252.62 | $10,265.39 | $10,278.17 |
| Total interest | $227.12 | $239.86 | $252.62 | $265.39 | $278.17 |
Data source: Author's calculations
As you can see, the low end is still a whopping $227.12 in earnings. Considering all you did was let your money sit there for six months, that's not a bad return. And 6-month CDs with a rate around 4.5% are fairly easy to find, and are even being offered by some of the big national banks.
If you're willing to do some searching for the best rate you can find, it could pay off: At the top end, you'd net an extra $51.05 for getting a 5.5% APY instead.
(Calculations were performed assuming monthly compounding. CDs that compound daily will earn about $1 more, give or take a few cents.)
Average 6-month CDs
Not all CDs are made equally. If you have a standard brick-and-mortar bank, you may wind up with a laughably low rate. I've seen big banks with 6-month CDs as low as 0.03% APY. And that's not a fluke. The national average is just 1.49%.
If you don't do a bit of comparison shopping and just choose any old CD, that low rate could cost you hundreds of dollars. Here's how much $10,000 earns in a sub-par CD:
| APY | 0.03% | 0.50% | 1.00% | 1.49% | 2.50% |
|---|---|---|---|---|---|
| End balance | $10,015.01 | $10,025.03 | $10,050.10 | $10,074.73 | $10,125.65 |
| Total interest | $15.01 | $25.03 | $50.10 | $74.73 | $125.65 |
Data source: Author's calculations
The lesson here is never assume every CD is going to give you a good rate. Always, always, always read your rate charts before signing up. Once you commit to a CD, it can be costly to withdraw your funds early.
Online banks are often a good place to find competitive CD rates. Your local credit union may also offer remarkably good rates.
Consider all the pros and cons
Although CDs offer great opportunities for growth, they aren't without drawbacks -- the main issue being that you're essentially locking in your funds for the duration of the CD. Nearly all CDs charge expensive fees for withdrawing your funds early.
Sure, six months isn't that long. But a lot can happen in six months. If you're at all worried about losing access to your money, a CD might not be the best place for it.
Don't despair. You may not need a CD to get a stellar APY on your savings. The best high-yield savings accounts are also offering APYs in the 5% range right now. Even better, you can often find savings accounts offering lucrative new account bonuses. Win win win!
In either case, be sure you're earning at least 3.4% on your savings to combat the loss of value from inflation. This will ensure you're at least breaking even.
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Rates as of May 20, 2024Ratings Methodology
| Advertisem*nt | |
| SoFi Checking and Savings | Barclays Online Savings |
| Member FDIC. | Member FDIC. |
Rating image, 4.50 out of 5 stars. 4.50/5Our ratings are based on a 5 star scale.5 stars equals Best.4 stars equals Excellent.3 stars equals Good.2 stars equals Fair.1 star equals Poor.We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs. | Rating image, 4.00 out of 5 stars. 4.00/5Our ratings are based on a 5 star scale.5 stars equals Best.4 stars equals Excellent.3 stars equals Good.2 stars equals Fair.1 star equals Poor.We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs. |
Open Account OnSoFi'sSecure Website. | Open Account OnBarclays'sSecure Website. |
Read Review | Read Review |
APY: up to 4.60% | APY: 4.35% |
Min. to earn APY: $0 | Min. to earn APY: $0 |
