How much interest would a $5,000 long-term CD make now?

Certificate of deposit (CD) accounts are a safe and predictable way to grow your money. Thanks to a locked interest rate that will remain the same for the full CD term, many have turned to CDs in recent years to help protect their funds in an inflationary environment. With CD terms ranging from three months to five years or longer, there are a multitude of options available, all with competitive rates that are many times higher than what can be secured with a traditional savings account.

In today’s changing economic climate, however, in which inflation has significantly fallen and interest rate cuts appear likely, many savers could benefit by opening a high-rate, long-term CD now. Before getting started, however, it behooves savers to crunch the numbers to see exactly how much interest they could earn. This is critical to understand as a withdrawal before the CD’s maturity date could result in having to pay a penalty. To that end, below we’ve calculated exactly how much interest a $5,000 long-term CD would make if opened now, timed to a variety of different terms and available rates.

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How much interest would a $5,000 long-term CD make now?

While a larger deposit will lead to a bigger return on a CD, a $5,000 deposit could be a safe way to capitalize on today’s rate climate while still leaving the majority of your funds readily accessible. Here’s how much interest you can expect to make based on different rates and terms now:

• 18-month CD at 5.00%: $379.65 for a CD total of $5,379.65 after 18 months
• 2-year CD at 4.76%: $487.33 for a CD total of $5,487.33 after two years
• 3-year CD at 4.61%: $723.87 for a CD total of $5,723.87 after three years
• 5-year CD at 4.50%: $1,230.91 for a CD total of $6,230.91 after five years
• 10-year CD at 3.75%: $2,225.22 for a CD total of $7,225.22 after 10 years

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Why a long-term CD is better than a high-yield savings account now

Some savers may like today’s high CD rates but are hesitant to open one and lose access to their money, no matter how much they initially deposit. In these circumstances, they may instead turn to high-yield savings accounts, which have interest rates almost as high as the best CDs, but still work like regular savings accounts, allowing users to withdraw and add money as needed.

But this could be a mistake.

With the prospect of interest rate cuts growing, a high-yield savings account may soon prove to be less profitable than CDs. That’s because rates on the former are variable and subject to change as the rate climate shifts, while CD rates are locked for the full CD term, whether or not rates rise or fall during that time. So, if you want to earn a larger and more reliable return, a CD is the smarter way to do so right now.

The bottom line

If you deposit $5,000 in a long-term CD now, you can earn hundreds and potentially thousands of dollars, depending on the rate and lender you ultimately use. And those earnings will be locked and predictable, which is a major advantage in today’s changing rate climate, making it preferable to high-yield savings accounts for many users. To earn these high rates, however, savers will need to shop around to find a lender offering the best rates and terms — and they should do so quickly, with the prospect of even slight rate changes to come as soon as this summer.

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