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CBS News
20 hours ago
- Business
- CBS News
Here's how much interest a $20,000 CD can earn now compared to a year ago
If you have $20,000 saved up now, you may be tempted to play the stock market. Returns on the market, historically, are reliable and the potential for making a quick profit or even more than you expected can be appealing now, especially when the economy is in a transition phase with inflation recently rising and high interest rates remaining frozen. On the other hand, if the volatility in the market and the aftereffects of the inflationary climate of recent years are too much to endure, you may find it easier to turn to a fixed-rate savings vehicle instead. A certificate of deposit (CD) account could be the perfect account to choose. Interest rates on CDs are fixed, allowing savers to calculate their earnings with precision. And with a $20,000 deposit, the returns could be worth hundreds and potentially thousands of dollars. But today's high rates may not last for much longer and they're already lower than what may have been secured last summer. To better determine the worth of a $20,000 CD now, then, it may help to compare the interest earnings available currently to what was available one year ago. Below, we'll complete the calculations. Lock in a high rate on a CD account here today. With CD rates being fixed, calculating the future interest earnings is simple to do. And while rates here have declined since last summer, they haven't fallen so significantly to render a CD account ineffective. Here's how much interest a $20,000 CD can earn now compared to a year ago, using advertised rates then and rates from Bankrate that are available now (on the assumption no early withdrawal penalties are issued): Comparing the two accounts, one year apart, the difference between earnings is stark. But this shouldn't discourage savers from acting and it should incentivize them to take advantage while the potential returns are still substantial, if not as high as they once were. At the start of the 2020s, rates on CDs were hovering around 1%, so today's rates are still exponentially higher. Get started with a high-rate CD while you still can here. If you're looking for a predictable and guaranteed return on your $20,000, it would be difficult to find a more reliable way to get it than with a CD account now. Rates here have declined over the past years and the interest-earning potential has waned accordingly. But with rates still substantial, returns worth hundreds and even thousands of dollars and the reality of interest rate cuts looming for later in 2025, this could be one of the better ways to protect and grow your hard-earned $20,000 right now.
CBS News
5 days ago
- Business
- CBS News
$20,000 long-term CD vs. $20,000 money market account: Which earns more interest now?
In today's evolving economic landscape, when inflation is rising again, high interest rates remain on pause and the costs of everyday expenses are elevated, maintaining access to the money you have painstakingly saved remains a top priority. And, put simply, a certificate of deposit (CD) account doesn't offer that flexibility. They do, however, come with high interest rates now, but those rates will need to be earned by keeping your funds untouched in the account until it matures. Take out the money prematurely, and you'll get hit with an early withdrawal penalty. That scenario becomes more likely with a long-term CD, which comes with terms ranging from 18 months to multiple years. A money market account, on the other hand, comes with similarly high rates and the flexibility that a CD account does not. Some money market accounts will even offer check-writing features for account holders. So, on the surface, it seems that a money market account would be the logical place to store your money now, particularly when looking for a home for a large, five-figure amount like $20,000. Before getting started, however, it's critical to consider the interest-earning potential each account type offers. Between a $20,000 long-term CD and a $20,000 money market account, which would earn more interest right now? Below, we'll do the math. See how much more money you could be earning with a high-rate CD account here. CD interest rates, as noted above, are fixed and will remain the same for the CD account's full term, even if the rate climate changes during that period. Money market account rates, on the other hand, are variable and expected to change over time, particularly over a multiple-year period. In other words, calculating the interest earnings of a CD is simple to do with precision, but impossible to do with a changing money market account rate. Here, then, is what a $20,000 deposit into both account types can earn now tied to current rates, assuming no early withdrawal penalties are applied to the CD and that the money market account rate remains constant: In each of these four instances, the money market account earns more interest. And the difference becomes starker over time, with the 5-year option earning more than $140 compared to the CD account. But this is all calculated on the assumption that today's rates will be the same in July 2030, which they almost assuredly will not. The rate climate has changed dramatically since July 2020 and could change in unexpected ways in the years to come. Savers, then, will need to answer one primary question: Does the lower but guaranteed interest they can earn with a $20,000 long-term CD outweigh the potentially bigger returns they can get with a money market account? For many, the long-term CD will be the safer (and more lucrative) option. Compare your current long-term CD rate offers here to learn more. A $20,000 money market account will earn more than a $20,000 long-term CD on the assumption that the former account's interest rates remain the same for years to come, which is highly unlikely. Savers should carefully consider both options before getting started. It likely took a long time to build up $20,000 in your savings, so take a bit more time to do your research and calculate your interest-earning possibilities to better determine where to move it next.
CBS News
10-07-2025
- Business
- CBS News
3 CD account mistakes savers should avoid making this July and August
To better protect their CD account, savers will need to know which timely mistakes to avoid making now. witthaya_prasongsin/Getty Images In recent years, savers could do no wrong by depositing money into a certificate of deposit (CD) account. With interest rates on these accounts multiple times higher than they were at the beginning of the decade and with those rates fixed, all savers needed to do was find an online bank to get started. By depositing the right amount of money into the right account, they could earn hundreds if not thousands of dollars with very little risk or effort. But the economy is changing again, and thus, the CD landscape isn't quite what it was in 2023 or 2024. In today's climate, with multiple rate cuts already issued and additional ones predicted for later this summer, savers will need to be a bit more strategic in their approach. That doesn't mean that CD accounts should be avoided (rates here still comfortably sit over 4%). But it does mean that savers will need to be more nuanced in their approach. That extends to knowing both what to do and what mistakes to avoid making this July and August, specifically. Below, we'll detail three CD account mistakes savers should be aware of right now. See how high today's CD interest rates are online here. 3 CD account mistakes savers should avoid making this July and August By understanding and avoiding these specific mistakes this summer, savers can better position themselves for CD account success: Mistake: Assuming CD rates will only change when the Fed takes action The chances of a rate cut at the Federal Reserve's July meeting are less than 7%, according to the CME Group's FedWatch tool. But they surged to almost 70% for the September meeting. So, yes, rate cuts are likely at some point this summer. Still, prospective CD account holders shouldn't just assume that rate changes will only take place when the central bank takes action. Many banks will adjust their rates before the Fed does, perhaps to a significant degree and potentially sooner than expected. So it would be a mistake to pass on a high-rate CD account offer now, while still readily available. Don't think you have more time to shop around than you actually do. If you find a high-rate CD online today, there's a strong argument to be made for locking it in, as rate changes aren't easy to time or predict, especially right now. Compare your current CD offers online and learn more. Mistake: Getting distracted by higher, short-term CD rates It's understandable if you want to earn the highest interest rate possible on your savings accounts while paying the lowest interest rate possible when borrowing. But you shouldn't let the interest rate distract you from your primary goal, which is to earn as much interest as you can, regardless of the time it takes to do so. While short-term CD rates can be considerably higher than their long-term counterparts now (think around 25 basis points), those short-term rates will mature in less than a year, potentially leaving you with less attractive options at that point. Long-term CDs, however, will earn a high rate for an extended period of 18 months or longer, allowing you to both grow your principal and protect your money against rate cuts to come, neither of which a short-term CD can offer to the same degree right now. Mistake: Not calculating the interest-earning potential before depositing money The caveat with CD accounts is clear: You'll be required to leave your money in the account for the full term to earn the interest, or see it negated by an early withdrawal penalty. If you can't make that commitment, then an alternative like a high-yield savings account may be the better fit. The financial sacrifice required with a CD, however, can be easily determined by calculating the interest-earning potential in advance of any deposit. So don't make the mistake of avoiding this math now, especially with rate cuts looming. By completing these calculations, you'll be better able to determine if a CD is worth it for you now and, specifically, in which amount and for which term. The bottom line The value of a CD account has been especially strong in 2022 and beyond and even though rates here are diminishing, savers can still make an account an integral part of their savings plan. But they'll need to avoid making these three simple but easy mistakes right now. By understanding these errors and taking proactive action to avoid them, these CD account holders can position themselves for long-term success, despite any market changes on the horizon.
CBS News
02-07-2025
- Business
- CBS News
Considering a $10,000 CD now? Here are 3 questions to ask first.
Don't deposit $10,000 into a CD account now before first asking yourself a few critical questions. Getty Images The economy is changing once again. Inflation is multiple points lower than it was at this point three years ago and is less than half a percentage point above the Federal Reserve's 2% goal. Interest rates, meanwhile, were reduced multiple times in 2024 and are expected to be cut again shortly, perhaps as soon as July or September. And stock market performance, following some uncertainty earlier in 2025, has bounced back in recent weeks. Still, any of these factors could change rapidly, easily impacting the money you have saved. If you've been able to put away a large, five-figure sum of money, then, you'll want to protect it and grow it as best you can. And a certificate of deposit (CD) account can help you accomplish both goals. Still, depositing $10,000 or more into one of these accounts shouldn't be done in a cavalier manner, either. Before getting started this month, then, savers should first contemplate the answers to a few critical questions. Below, we'll detail three worth asking right now. Start by seeing how much interest you could be earning with a high-rate CD online today. 3 questions to ask before opening a $10,000 CD now While the following three questions aren't the only ones savers contemplating a CD of this size should be considering now, the answers to these critical ones will help better inform their overall approach: Is a short-term or long-term CD better? Historically, interest rates on short-term CDs were lower than their long-term counterparts, thus encouraging savers to lock their funds away for a longer period. But that's not the case right now, as short-term CDs tend to have rates as much as 25 basis points higher than long-term CDs, approximately. You'll need to calculate the interest-earning potential on both, then, to determine where you stand to earn more money. But you'll need to do so against the backdrop of an early withdrawal penalty if you take the funds out prematurely. These fees can potentially eliminate all or most of the interest earned to that point, depending on the lender, which can be significant for interest earned on $10,000. So you'll want to make sure you picked the term that best fits your financial goals (and budget). Compare your current short-term and long-term CD rate offers here now. Can I afford to keep this much money frozen? Chances are good that this $10,000 didn't just show up in your bank account without a lot of hard work and sacrifice. So you'll want to make sure to save it as best you can. But is a CD the most applicable way to do so, considering your financial situation? No matter if you choose a 3-month or 3-year CD, you'll need to keep this five-figure amount of money frozen until the maturity date, which may not always be achievable. Before parting with it, then, consider your realistic ability to keep it frozen as dictated by your lender and, potentially, look to put a smaller amount into an account instead. This will keep part of your funds liquid while giving the other portion the flexibility it needs to grow untouched in a high-rate CD. Have I compared it to the alternatives? Don't dismiss the alternative savings vehicles that come with high rates right now. Sure, high-yield savings and money market accounts both have variable rates. And both are positioned to decline alongside the federal funds rate as additional cuts are issued there. But rates on both accounts are still comparable to the top CDs right now and they're not likely to decline in such a material way anytime soon that will totally eliminate their advantages to savers. If you need to keep the $10,000 as an emergency fund, too, both may be better for you now (and money market accounts may even offer check-writing services that CDs will not). Whatever you decide to do, however, make sure you do it after closely comparing all of your alternatives. The bottom line With high rates and the potential to earn hundreds or even thousands of dollars with the right approach, many savers may feel inclined to rush into a CD account opening now. And that may (or may not) be the right decision. By taking a deep breathe, however, and by contemplating the answers to these three questions, these savers can better determine their next steps. With a realistic view of the market and a strategic approach, they can potentially make this $10,000 grow even further while protecting their principal at the same time.
CBS News
25-06-2025
- Business
- CBS News
How much will a $20,000 2-year CD account earn if opened now?
Savers can earn a significant amount of interest by depositing $20,000 into a 2-year CD this money into a certificate of deposit (CD) account will require some sacrifice on behalf of the saver. To earn the interest the account offers, savers will need to keep their money untouched in the account for the full CD term (or length). Withdraw even a portion of it before the account matures, and you'll get stuck with an early withdrawal penalty that could wipe out all or most of the interest earned on the account to date. While this can be manageable for small amounts with CD terms of just a few months, it becomes much more challenging to do so with large deposit amounts and accounts of longer terms, such as one year or more. But will that loss of accessibility be worth it? If you're considering a five-figure deposit, like $20,000, into a 2-year CD account, for example, it could be. The interest-earning possibilities here are significant and could be valuable for many savers, especially those looking for a reliable return and stability in today's unpredictable economic climate. To better determine this type of CD account's worth, then, it can be useful to calculate the interest earnings. Savers may be surprised at how much they can potentially make. Start earning more interest on your money with a high-rate CD here. How much will a $20,000 2-year CD account earn if opened now? Opening a CD account online makes sense, especially in today's rate climate, in which rate cuts are widely expected later this summer. Online banks tend to have lower maintenance costs than banks with physical locations. Those savings can then be passed on to savers in the form of higher interest rates on CDs and high-yield savings accounts. A quick look around online, then, shows 2-year CD account rates comfortably over 4%. Here's what a $20,000 deposit would earn for each readily available rate: $20,000 2-year CD at 4.10%: $1,673.62 for a total of $21,673.62 $1,673.62 for a total of $21,673.62 $20,000 2-year CD 4.15%: $1,694.45 for a total of $21,694.45 $1,694.45 for a total of $21,694.45 $20,000 2-year CD at 4.40%: $1,798.72 for a total of $21,798.72 So savers can earn at least $1,673 with a $20,000 2-year CD if opened this June, and potentially more if they take the time to shop around for a high-rate CD online. That said, with the likelihood of interest rate cuts growing for when the Federal Reserve meets this summer, and the chances of those rate cuts impacting what savers can earn with CDs, it behooves savers who are considering this type of account to be proactive. These high rates and great returns may not last much longer. Get started with a long-term CD online today. What about a $20,000 1-year CD account? While the potential to earn more than $1,600 on your funds may sound attractive, it can be daunting to keep your money frozen for 24 months in a CD. If that doesn't sound manageable, a 1-year CD account will cut the time you lose access to your funds in half – and still result in a sizable return, albeit a lower one than the 2-year CD. Here's what earnings on a $10,000 1-year CD account would look like instead: $20,000 1-year CD at 4.40%: $880.00 for a total of $20,880.00 $880.00 for a total of $20,880.00 $20,000 1-year CD at 4.45%: $890.00 for a total of $20,890.00 $890.00 for a total of $20,890.00 $20,000 1-year CD at 4.66%: $932.00 for a total of $20,932.00 Although the returns here aren't as high as the 2-year CD option, they're still significant and they'll allow savers to earn more on their money while still giving them protection for the next year against any market uncertainty, which may be all savers require right now. The bottom line A $20,000 2-year CD account comes with returns over $1,600 if opened now while a 1-year CD account for the same amount comes with interest over $800. But these rates and the interest-earning opportunities won't be around forever – or even, potentially, into the fall. So, if you want to earn more on your money and can afford to keep it frozen in an account for a year or longer, a long-term CD could be the smart place to park your funds right now.
