CD Investments: How Much Can CDs Earn?

CDs are savings accounts for investing short-term funds. Compare returns on a CD with the calculator below.
Jul 15, 2022
CD Investments: How Much You Can Earn

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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 are in a rising rate environment thanks to 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, which is close to the national average rate, 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 2.80%, your account earns $1,480 in interest, a difference of more than $1,200.

4 elements of CDs that can affect returns

  • CD rate: This factor determines how much your money grows over time. Longer CD terms tend to have higher rates when looking at one bank’s offerings, but don’t stop at one bank. 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.

  • Initial deposit: Unlike regular savings accounts, CDs 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.

  • Early withdrawal penalty: If you need to cash out early from a CD, there’s usually a cost. The penalty is not 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 to only 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 2.00% APY would earn about $100 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

3-month CD

0.12% APY

6-month CD

0.27% APY

1-year CD

0.46% APY

3-year CD

0.54% APY

5-year CD

0.64% APY

Source: Federal Deposit Insurance Corp.

Federal Deposit Insurance Corp. National Rates and Rate Caps. Accessed Jul 15, 2022.

Best CD rates

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

Discover Bank logo
Learn More

Member FDIC

Discover Bank CD

Discover Bank logo
APY

2.30%

Term

1 year

Barclays logo
Learn More

Member FDIC

Barclays Online CD

Barclays logo
APY

2.30%

Term

1 year

Discover Bank logo
Learn More

Member FDIC

Discover Bank CD

Discover Bank logo
APY

3.20%

Term

5 years

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.)

» Not sure how long to invest? Read our guide on choosing the right CD term length

Discover Bank logo
Learn More

Member FDIC

Discover Bank CD

Discover Bank logo
APY

2.30%

Term

1 year

Barclays logo
Learn More

Member FDIC

Barclays Online CD

Barclays logo
APY

2.30%

Term

1 year

Discover Bank logo
Learn More

Member FDIC

Discover Bank CD

Discover Bank logo
APY

3.20%

Term

5 years

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.

See CD rates by term and type

Compare the best rates on certificates of deposit for various CD terms and types:

See CD rates by bank

If you want to see CD rates at specific banks, here’s a quick list of both traditional and online banks’ CDs (and one brokerage’s offering):

How do CDs work?

Learn more about the journey of choosing, opening and closing CDs.

For choosing CDs:

For understanding CD rates:

For opening CDs:

For closing CDs:

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. Given high inflation rates, a Series I savings bond, or I bond, has an inflation-adjusted rate that may be appealing.

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