Here's How Much $5,000 Would Earn in a 6-Month CD Right Now
KEY POINTS
- $5,000 should get you past the deposit minimum for the majority of CDs, though not all.
- The best 6-month CDs are offering APYs of 4.5% to 5.5%, but the national average is just 1.49%.
- If you need access to your money and/or want to earn a welcome bonus, consider a savings account over a CD.
While there are certainly downsides to interest rates going up, one fantastic upside is that rates on CDs, or certificates of deposit, go way up. In fact, some of the best CDs are offering annual percentage yield (APYs) of more than 5%.
Some CDs have ridiculously high deposit minimums, but a $5,000 deposit will be enough for many highly competitive 6-month CDs. Here's what that could look like in terms of yield.
High-yield 6-month CDs
You won't find these kinds of rates from every bank, but the current top 6-month CDs are generally between 4.5% and 5.5%. (I haven't personally seen one over 6% yet. The current national rate cap is 7.21%.)
With $5,000 to deposit, here's how much you could earn:
| APY | 4.50% | 4.75% | 5% | 5.25% | 5.50% |
|---|---|---|---|---|---|
| End balance | $5,113.56 | $5,119.93 | $5,126.31 | $5,132.69 | $5,139.09 |
| Total interest | $113.56 | $119.93 | $126.31 | $132.69 | $139.09 |
(I assumed that funds compounded monthly. A CD that compounds daily may earn a bit more, but it'll be less than $1.)
So, where do you find these impressive APYs? Well, if you don't mind the lack of branches, online banks often have great rates. If you prefer the in-person touch, check out your local credit union. (Some of the highest rates I've seen came from credit unions.)
You may also want to check for any promotional CDs. You may find promotional offers with odd terms -- literally; I've seen 7-month and 9-month promotional CDs -- with remarkably high rates, while those banks' regular 6-month CDs wallow points behind the competition.
Average 6-month CDs
According to FRED data, the average rate for a 6-month CD is just 1.49%. But we all know that "average" means there are lots of CDs with lower rates. (I've seen a few as low as 0.03%!)
How much are those low rates going to cost you? Here's the yield from a $5,000 6-month CD at a more "average" rate:
| APY | 0.03% | 0.50% | 1.00% | 1.49% | 2.50% |
|---|---|---|---|---|---|
| End balance | $5,007.50 | $5,012.51 | $5,025.05 | $5,037.37 | $5,062.83 |
| Total interest | $7.50 | $12.51 | $25.05 | $37.37 | $62.83 |
I think the numbers speak for themselves on this one. A junky 0.03% interest rate from your big-name bank is going to earn you just $7.50 after six months. That's $106.06 less than you'd earn with a 4.5% APY.
If that doesn't make you pause, consider this: Given that inflation is currently 3.4%, you're actively losing value if your CD -- or savings account, or checking account -- earns anything less than 3.4%.
CDs vs. savings accounts
In general, CDs offer some of the highest APYs of any type of low-risk savings product. Provided you don't need access to the funds during the maturity period of the CD, they are a great place for your mid-term savings.
However, what if that savings is part (or all) of your emergency fund? It's really ill-advised to tie up that money for any period of time, even just six months.
Well, you may not have to worry about it. At this very moment, you can find high-yield savings accounts offering the same 5% APY as some of the best CDs. Even better, some banks offer new account bonuses for opening a new savings account and meeting certain deposit conditions.
In other words, you could earn a competitively high APY, not tie up your money, and earn a welcome bonus, all in one move. It's worth considering, in my opinion.
Whichever route you choose to go, just make sure you're not letting your funds lose value in a low-yield account. Your money should always be making you money.
Our Research Expert
We're firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. Motley Fool Money does not cover all offers on the market. Motley Fool Money is 100% owned and operated by The Motley Fool. Our knowledgeable team of personal finance editors and analysts are employed by The Motley Fool and held to the same set of publishing standards and editorial integrity while maintaining professional separation from the analysts and editors on other Motley Fool brands. Terms may apply to offers listed on this page. APYs are subject to change at any time without notice.