Why you should put $15,000 into a 1-year CD now (2024)

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MoneyWatch: Managing Your Money

By Joshua Rodriguez

Edited By Angelica Leicht

/ CBS News

Why you should put $15,000 into a 1-year CD now (2)

If you considered a certificate of deposit (CD) a couple of years ago, chances are that the minimal returns that financial institutions were offering at the time weren't particularly enticing. But it's time to take a second look, becausetoday's CD interest rates are impressive, to say the least.

That's because, in March 2022, the Federal Reserve increased its target federal funds rate in aneffort to combat inflation. Following that first rate hike, the central bank then increased its benchmark interest rate 10 more times in less than two years.

That had big benefits for savers since the federal funds rate sets the foundation for deposit account returns. As a result of the Federal Reserve's aggressive interest rate increases, the best 1-year CDs on the market now offer 5.50% APYs or higher. So, if you haven't already, you may want to give these unique savings vehicles a look.

Open a CD today to lock in impressive returns.

Why you should put $15,000 into a 1-year CD now

If you have $15,000 sitting in your safe or a traditional savings account, chances are that your savings aren't producing a meaningful return. So, your idle cash is losing purchasing power as inflation drives prices higher.

In turn, it could be a wise idea to put that $15,000 into a 1-year CD. Here are five reasons you should invest in a CD right now:

CDs offer fixed returns

One of the most important benefits of a CD "is that the investor will maintain a higher rate should interest rates fall," says Peter Mitroff, partner and private wealth advisor at Stoney Creek Advisors.

"Interest rates are bouncing all over these days," says Lamar Brabham, CEO and founder of Noel Taylor Agency. "Grabbing one that looks good and that you can live with for a while is advisable."

The high interest rates savers are enjoying today won't last forever. ButCDs give you an opportunity to lock in today's high rates and enjoy them for the entire CD term.

Lock in today's impressive interest rates with a one-year CD now.

CDs are a safe investment

CDs are deposit accounts, and as deposit accounts, they're typically FDIC- or NCUA-insured for up to $250,000 per depositor, per account. As a result, they're a safe investment— that is, as long as you open your account with a reputable, insured financial institution.

FDIC and NCUA insurance protects the money you deposit into the account, up to the limits, so that if the financial institution you deposit the money with goes out of business, you won't lose your money.

CDs don't have maintenance fees

When you save money, your ultimate goal is to earn as much of a return on your savings as possible. However, if you're paying unnecessary fees, like maintenance fees or service fees, to the institution you save your money with, they can cut into your returns. And, if the fees are too high, they could eliminate your returns altogether.

That's not something you typically have to worry about when you open a CD, though. That's because CDs don't usually come with fees. As a result, you'll enjoy 100% of the return on your money.

The best CD rates currently beat inflation

It's important to try and earn a positive inflation-adjusted return on your idle money. If you don't earn a positive inflation-adjusted return, the money you're saving is losing buying power. Although not all CDs offer returns that outpace inflation, today's highest-performing options do.

The current inflation rate in the United States is 3.2% annually. Some of the leading 1-year CDs on the market today offer the following returns:

  • Popular Direct: 5.67%
  • LendingClub Bank: 5.65%
  • CIBC Bank USA: 5.62%

Every one of these options offers an annual return that's well ahead of the current inflation rate. That means that when you open a 1-year CD at any of the financial institutions mentioned above, you'll earn a positive inflation-adjusted return.

You could earn as much as $850.50

With such high interest rates, the earnings on CDs are impressive. You'll earn $850.50 for a total of $15,850.50 after one year when you open a $15,000 1-year CD with Popular Direct when calculating the returns at current rates. A 1-year CD at LendingClub Bank or CIBC Bank USA will produce $847.50 or $843.00 in returns, respectively.

Lock in strong returns with a one-year CD today.

The bottom line

Today's impressive CD rates are the result of the United States Federal Reserve increasing its federal funds rate in an attempt to combat inflation. As inflation slows, there's no telling how long these high rates will last. So, it's wise to lock in today's high rates by investing $15,000 into a 1-year CD now.

Joshua Rodriguez

Joshua Rodriguez is a personal finance and investing writer with a passion for his craft. When he's not working, he enjoys time with his wife, two kids, three dogs and 10 ducks.

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Why you should put $15,000 into a 1-year CD now (2024)


Why you should put $15,000 into a 1-year CD now? ›

You'll earn $850.50 for a total of $15,850.50 after one year when you open a $15,000 1-year CD with Popular Direct when calculating the returns at current rates. A 1-year CD at LendingClub Bank or CIBC Bank USA will produce $847.50 or $843.00 in returns, respectively. Lock in strong returns with a one-year CD today.

Is it worth putting money in a CD right now? ›

CDs are worth investing in for risk-averse investors who want to keep their money safe while maintaining more of its purchasing power. Although you have to lock your money away for a specific amount of time, the payout from a long-term CD can be enticing. For example, Quontic offers a 5.05% APY on their six-month CD.

How much will a $15000 CD make in a year? ›

So, how much would a $15,000 CD make in a year? Here's what you can expect depending on the interest rate you lock in: At 6.00%: $900 (for a total of $15,900 after one year) At 5.75%: $$862.50 (for a total of $15,862.50 after one year)

Why you should put $20 000 into a long-term CD now? ›

The bottom line

If you put $20,000 into a 3-year CD, you could earn more than $3,000 in interest by the end of the term, depending on the interest rate you get. And, a CD is safe and secure thanks to the insurance it comes with.

Should I lock in longer term CD rates now? ›

If you believe interest rates will stay elevated for the near future or need regular income, CD laddering may still make sense. If you're concerned about interest rates falling in the future and don't expect to need access to your funds, locking in today's high rates for the long-term may make more sense.

What is the biggest negative of putting your money in a CD? ›

Whenever you invest in a CD, you lock in the interest rate for the term. If inflation rises during the term, your APY won't be adjusted, so an interest rate that once seemed stellar might be lackluster after accounting for inflation.

What is a disadvantage to putting your money into a CD? ›

One major drawback of a CD is that account holders can't easily access their money if an unanticipated need arises. They typically have to pay a penalty for early withdrawals, which can eat up interest and can even result in the loss of principal.

Is a 6 month CD worth it? ›

When Should You Get a 6-Month CD? CDs tend to offer higher yields than traditional savings and money market accounts, especially in a low-interest rate environment. A 6-month CD may be a good option if you know that you won't need access to your funds for at least six to nine months.

Is it better to get CD interest monthly or yearly? ›

That's up to each issuer. In practice, however, most CDs compound either daily or monthly. The more frequent the compounding, the more interest your interest will earn. The frequency with which your CD compounds is reflected in the annual percentage yield (APY) that the CD's issuer promises you when you buy a CD.

Can you get 6% on a CD? ›

You can find 6% CD rates at a few financial institutions, but chances are those rates are only available on CDs with maturities of 12 months or less. Financial institutions offer high rates to compete for business, but they don't want to pay customers ultra-high rates over many years.

How high will CD rates go in 2024? ›

The national average rate for one-year CD rates will be at 1.15 percent APY by the end of 2024, McBride forecasts, while predicting top-yielding one-year CDs to pay a significantly higher rate of 4.25 percent APY at that time.

Why does Dave Ramsey not like CDs? ›

But when it comes to long-term savings, Dave Ramsey cautions against opening a CD. In fact, he insists that CDs are really nothing more than glorified savings accounts with slightly higher interest rates. The problem with those rates is that they don't do a good enough job of keeping up with inflation.

Is a 12 month CD worth it? ›

A one-year CD typically offers a higher interest rate than shorter-term CDs, such as three-month CDs and six-month CDs. Offers higher interest rates than traditional savings accounts.

What is the disadvantages of the longer term CD? ›

Limited access to your cash

When you open a long-term CD, you should make sure you're willing to part with your cash over the entire term length. CDs carry early withdrawal penalties, which can cost a portion (or even all) of your interest earned.

What will CD rates be in 2025? ›

"Shorter CD rates won't collapse and will still offer far higher yields than the ones we experienced in 2021 and prior years," Krumpelman says. "Even in 2025, we expect short CDs to pay more than 3%."

What is the interest rate forecast for 2024? ›

This reflects an upward revision in Fannie's analysis: Just last month, the mortgage giant expected rates would dip below 6% at the end of this year. All told, Fannie Mae predicts mortgage rates will average 6.6% in 2024 and 6.2% in 2025.

How much does a $10000 CD make in a year? ›

Earnings on a $10,000 CD Opened at Today's Top Rates
Top Nationwide Rate (APY)Balance at Maturity
6 months5.76%$ 10,288
1 year6.18%$ 10,618
18 months5.80%$ 10,887
2 year5.60%$ 11,151
3 more rows
Nov 9, 2023

Why is CD not a good financial investment? ›

CD rates may not be high enough to keep pace with inflation when consumer prices rise. Investing money in the stock market could generate much higher returns than CDs.

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