Here's how much you could make if you put $20,000 into a 5-year CD right now (2024)

FAQs

Here's how much you could make if you put $20,000 into a 5-year CD right now? ›

So, no matter which 5-year CD you choose, you're going to earn between $4,000 and $4,700 on a $20,000 deposit at today's best rates. Keep in mind, you have to pay taxes on CD interest, so your total return could be less. Still, this is a decent return for a relatively risk-free investment.

How much interest would you earn? If you put $20,000 into a 5-year CD with an interest rate of 4.60%, you'd end the 5-year CD term with $5,043.12 in interest, for a total balance of $25,043.12. Not all CDs offer that interest rate, though.

That said, here's how much you could expect to make by depositing $20,000 into a one-year CD now, broken down by four readily available interest rates (interest compounding annually): At 6.00%: $1,200 (for a total of $21,200 after one year) At 5.75%: $1,150 (for a total of $21,150 after one year)

Current 5-Year CD Rates

The current national average rate for a five-year CD is 1.40% as of May 20, 2024, according to the FDIC. This represents the average across all banks and credit unions that provide data.

CD rates are at a 3-year high—but waiting longer to buy could be a gamble. Interest rates on certificates of deposits (CDs) have been increasing substantially since 2022—in lock-step with the Fed's rate hikes. The national deposit rate for 5-year CDs is 1.39%, up from less than 0.50% in June 2022.

Banks and credit unions often charge an early withdrawal penalty for taking funds from a CD ahead of its maturity date. This penalty can be a flat fee or a percentage of the interest earned. In some cases, it could even be all the interest earned, negating your efforts to use a CD for savings.

How much interest does $20,000 per year in a savings account? If you put your money in a traditional bank that earns 0.01%, you'd have $20,002.00 by the end of the year. In a high-yield savings account that earns 0.60%, you'd have $20,120.

The highest certificates of deposit (CDs) rates today are offered by Nano Bank (6.00%), Merchants Bank of Indiana (5.92%), Shoreham Bank (5.50%) and Vast Bank (5.50%). You can see the full list of the highest-paying CDs here.

How often does a 5 year CD pay interest? ›

Most CDs compound interest at a monthly or quarterly frequency, but some compound annually. The more frequently interest is compounded, the more you'll earn. Using the above example, say you invest $1,000 in a five-CD with a 5% annual interest rate, but this CD accrues compound interest.

For context, in 2021, when rates were around their lowest, the national average 12-month CD had an APY of just 0.15%. For a $5,000 deposit, this is the difference between earning $250 in interest over a year versus earning only $7.50 over that same time frame.

Reasons To Avoid Locking Your Money Up

In that case, parking your money in a CD means you may wind up with a lower return than you would earn with a high-yield savings account. Jones points out that another downside to CDs is lack of liquidity, along with the potential for tax ramifications.

If, for example, you opened a five-year CD with $10,000 on Jan. 1, 2024, that pays 4 percent APY, the $400 in interest you earn in 2024 will be taxable in that year. Interest earned in each of the remaining four years qualifies as income and is taxable in the year it's earned.

It's possible to get a 6% certificate of deposit, but currently, they're only offered by credit unions, not banks. Pros of a 6% CD include locked-in interest rates and a relatively high rate of return.

For 3-year CDs: 90 days of interest. For 4-year CDs: 120 days of interest. For 5-year CDs: 150 days of interest.

Unlike how the stock market or a Roth IRA can lose money, you typically cannot lose money in a CD.