With inflation on the rise and interest rate cuts delayed, now may be a smart time to take advantage of today’s elevated CD rate climate. A long-term CD offers a substantial return and protects your money against interest rate volatility during that term.
Historically, interest rates have been higher on long-term CDs than short-term ones. However, banks have reversed this trend due to the wider rate climate in recent years, offering higher rates on CDs with shorter terms. Despite this, long-term CD savers can still earn a significant return.
To calculate the potential earnings of a $5,000 long-term CD, consider the following options:
– 18-month CD at 4.16%: $315.22 for a total of $5,315.22 upon maturity
– 2-year CD at 4.15%: $423.61 for a total of $5,423.61 upon maturity
– 3-year CD at 4.15%: $648.69 for a total of $5,648.69 upon maturity
– 5-year CD at 4.25%: $1,156.73 for a total of $6,156.73 upon maturity
With the shortest option, savers can earn hundreds of dollars in interest, and with the longer one, they can earn over $1,100. If you have $5,000 ready to deposit and can comfortably afford to part with the money for the full CD term, now may be the time to act.
Comparing these returns to short-term CD options is key. For example:
– 3-month CD at 4.50%: $55.32 upon maturity for a total of $5,055.32
– 6-month CD at 4.45%: $110.04 upon maturity for a total of $5,110.04
– 9-month CD at 4.35%: $162.25 upon maturity for a total of $5,162.25
– 1-year CD at 4.40%: $220.00 upon maturity for a total of $5,220.00
The difference in returns becomes stark when comparing short-term and long-term CDs. With a $5,000 deposit, savers can earn hundreds or possibly over a thousand dollars by choosing the right long-term CD.
Ultimately, finding a good CD rate requires minimal effort. Visit your local bank branch to see what they have to offer, but consider online banks for better rates and more flexible terms. Remember that any money deposited will be subject to an early withdrawal penalty, so it’s essential to deposit an amount you can comfortably part with for the full CD term.
Source: https://www.cbsnews.com/news/how-much-will-a-5000-long-term-cd-earn-now-march-2025