CD Investments: How Much Can CDs Earn?

CDs are savings accounts for short-term cash investments. Compare returns on a CD with the calculator below.
Spencer Tierney
By Spencer Tierney 
Updated
Edited by Sara Clarke

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Certificates of deposit can be considered smart, low-risk investments for some of your money. A CD investment provides guaranteed returns and your money stays federally insured. How much interest you can earn on a CD depends on the rates, which can be affected by Fed rate increases. See what CDs can earn below.

CD comparison calculator

Calculate what interest you’d get from two different CDs. To see how rates really matter, keep the deposit and term lengths the same and notice how the interest rate would affect your overall savings.

Here’s an example. If you invested $10,000 in a five-year CD at 0.50% APY, you would have earned about $253 in interest at the end of five years.

Now let’s try a top rate at an online bank. If you invested that same $10,000 in a five-year CD at 4%, your account earns about $2,167 in interest, a difference of more than $1,900.

What is a CD investment?

A CD investment can refer to money placed in one or more certificates of deposit, a type of federally insured bank account with a fixed interest rate and fixed term length and typically no access to funds until maturity.

CDs are available at banks and brokerage firms, but unlike bank CDs, CDs at brokerages are called brokered CDs that can be bought and sold. This article focuses on the more common type of CDs, standard bank CDs.

4 elements of CDs that can affect returns

  • CD rate: This factor determines how much your money grows over time. See our list of the best CD rates.

  • CD term: CDs have fixed term lengths typically ranging from three months to five years. The longer the term to let your money grow, the more interest you can earn. Learn more about CD terms.

  • Deposit amount: Unlike regular savings accounts, CDs typically require the entire sum you want to save upfront. The larger the amount, the more interest you can earn. Banks tend to have minimum deposit requirements as well. Learn about how much to put into CDs.

  • Early withdrawal penalty: If you need to cash out early from a CD, there’s usually a cost. The penalty isn't usually a percentage or fixed fee, but a certain number of months of interest you’ve earned or would’ve earned. Learn more about early withdrawal penalties.

Frequently asked questions

Yes, a CD can be considered an investment — or a means of generating returns — for your short-term savings. An investment doesn’t refer just to funds in the stock market.

Yes, if you’re looking for guaranteed returns with little to no risk. Other types of investments, such as in the stock market, can offer greater returns, but with much greater risk.

It depends on the interest rate the bank offers and the length of the CD’s term. Here’s an example: $5,000 invested in a 1-year CD with a 4.00% APY would earn about $200 by the end of the term. Use the calculator on this page to see other combinations.

Yes, but only if you withdraw your money from a CD before the term ends. Most banks charge a penalty fee equal to a certain amount of interest — for example, six months’ worth. Learn more about how to avoid early withdrawal penalties.

Current national average CD rates

Term

National average rate

3-month CD

1.53% APY.

6-month CD

1.81% APY.

1-year CD

1.86% APY.

3-year CD

1.44% APY.

5-year CD

1.43% APY.

Source: Federal Deposit Insurance Corp.

Federal Deposit Insurance Corp. National Rates and Rate Caps. Accessed Sep 22, 2023.

For more details, see the average rates for deposit accounts.

» Want to compare? See current CD rates for high-yield CDs

Best CD rates

You can find CDs that have rates many times the national average. Online banks and online credit unions tend to have the top rates. Check NerdWallet’s best CD rates.

Goldman Sachs Bank USA logo
Learn More

Member FDIC

Marcus by Goldman Sachs High-Yield CD

Goldman Sachs Bank USA logo
APY

5.10%

Term

6 months

Why should I consider CDs?

They’re safe. Like savings accounts, CDs are federally insured to protect your money, both at online and traditional banks as well as at credit unions. This means they have minimal risk, whereas investing in the stock market — another option to grow your money — is more unpredictable and can lead to losses, especially in the short term. See more about CD safety.

But CDs have an opportunity cost. The typical CD has a fixed rate, so once you lock up your money for months or years, you close the door to higher rates that might appear.

Bottom line: CDs might be right for you if you want to avoid risky investments and you’ve set aside money you won’t need for some time. (If, on the other hand, access is a priority, check out NerdWallet’s best savings accounts.)

How to have CDs and flexibility

If you're trying to decide between a CD and something less restrictive, there’s a middle-of-the-road option: CD ladders. This is a savings strategy in which you open CDs of varying lengths. One common scenario involves opening five CDs, with terms of one year, two years, three years, four years and five years. The goal is to have one CD maturing each year to give you the option to reinvest or cash out each time. Learn more about CD investment strategies.

Other safe investments

High-yield savings accounts: These regular savings accounts, generally available at online banks and credit unions, provide some of the best savings rates.

Savings bonds: Similar in function to a CD, a savings bond lets you earn interest on an upfront sum of money that you can’t access for a period. Instead of lending money to a bank as you do with a CD or savings account, you lend to the U.S. government. During high inflation, a Series I savings bond, or I bond, has an inflation-adjusted rate that may be appealing.

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