Lauren Smith, WalletHub Staff Writer
@laurenellesmith
A $10,000 certificate of deposit (CD) can make as much as $538 in a year right now, assuming a 5.38% APY and monthly compounded interest. Note, the highest one-year CD yields range between 5.0% and 5.5%, while the average is just under 2.0%.
1-Year CDs with the Highest APY
| Issuer | APY | Minimum Deposit |
| 5.38% | $10,000 | |
| 5.36% | $1,000 | |
| 5.36% | $5,000 | |
| 5.35% | $1,000 |
Note, rates can vary depending on market conditions and the specific terms of the CD. You can compare CDs currently on the market here at WalletHub.
How CD Rates Work
CD interest rates are typically fixed, meaning they remain constant throughout the CD's term, and CD interest typically compounds daily or monthly. With compounding, the interest you earn is added to the principal, and subsequent interest calculations are based on the new total. This compounding effect can lead to higher overall earnings.
For example, a $10,000 CD with a 3% interest rate compounded daily for 1 year would earn approximately $304.33. This would result in a total value of approximately $10,304.33 at the end of the CD term and an APY of 3.043%.
To compare CD rates accurately, it's essential to consider the Annual Percentage Yield (APY). APY represents the effective annual rate of return, factoring in the interest rate and the compounding frequency. It gives you a more accurate picture of the total return on your investment.
You can find the best CDs here at WalletHub.
People also ask
Why would anyone put money in a CD?
There are several reasons why someone might choose to put money in a Certificate of Deposit (CD). These include safety, guaranteed returns, higher interest rates, encouraging savings, and diversification:
- Safety: CDs are low-risk investments. They are often insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000 per depositor, per bank, which means your money is protected.
- Guaranteed Returns: CDs offer a fixed interest rate, so you know exactly how much you'll earn over the term...
Is it good to put money in a CD?
Yes, a CD is a good place to put your money. CDs are insured and offer a steady return with fixed interest rates. However, they have some risks to consider, early withdrawal penalties, limited liquidity, inflation and others. Here's a breakdown of the pros and cons to help you decide:
Pros
- Higher interest rates than savings accounts: CDs typically offer higher interest rates than traditional savings accounts. This means you can earn...
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