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You never want to put your money into an account that won’t earn interest. And in the economic climate of recent years, you really couldn’t afford to. With inflation at a decades-high, interest rates at their highest point in years and the cost of everyday expenses elevated, your money needed to work for you as much as possible. Fortunately, for those who took advantage, both certificates of deposit (CDs) and high-yield savings accounts offered effective pathways to do this, with both savings vehicles offering interest rates over 4% and sometimes even higher.
But the economy is evolving again. Inflation is down multiple points from where it was in June 2022, for example, and interest rate cuts were issued in 2024 and could be issued again later this year. This means that savers will need to be a bit more strategic in their approach and it may mean reevaluating where they keep large, five-figure amounts of money right now. With a CD, they may be able to lock in long-term protection with a 1-year term, but with a high-yield savings account, they can earn a high rate and maintain access to their funds.
To better determine which option is more beneficial for a $10,000 deposit made now, it can be helpful to calculate the interest-earning opportunity for both. Below, we’ll complete the calculations.
See how much more money you could be earning with a high-rate CD here.
$10,000 1-year CD vs. $10,000 high-yield savings account: Which will earn more interest?
Calculating the interest on either account type is relatively straightforward. You’ll need the deposit amount (in this case, $10,000), the interest rate (4.45% for 1-year CDs and 4.30% for high-yield savings accounts) and the length of the account (both 12 months). That said, CD interest rates are fixed and high-yield savings account rates are variable, so predicting the latter interest earnings is difficult to do with precision as the rate can and likely will change over time. That said, here’s what each could earn now, assuming the high-yield savings account rate remains constant:
- $10,000 1-year CD at 4.45%: $445.00 for a total of $10,445.00
- $10,000 high-yield savings account at 4.30% after one year: $430.00 for a total of $10,430.00
Not only will you earn around $15 more with a 1-year CD in this example, but those earnings will be guaranteed versus the high-yield savings account, which won’t be thanks to the variable rate. And while that could change positively (if rates are hiked and high-yield savings account rates rise alongside it), that appears unlikely now. With the CME Group’s FedWatch tool listing a rate cut at more than a 75% likelihood for September, which will lead to a reduction in savings rates, perhaps before that point, many savers would benefit from depositing their $10,000 into a CD account instead.
Get started with a 1-year CD here.
What about money market accounts?
A money market account could be a viable alternative for those looking to deposit $10,000 or more right now. Interest rates on these accounts are high and comparable to the top high-yield savings accounts. Plus, money market accounts won’t require you to forego access to your money like a CD would, and they come with other features, like check-writing. But the big caveat remains the same: These accounts also have variable interest rates, which are also subject to decline later this year, making them a risk for savers looking to exploit today’s high-rate climate for an extended period.
The bottom line
A $10,000 1-year CD earns more interest than a $10,000 high-yield savings account if opened now and that interest will be guaranteed, unlike a high-yield savings account with a variable rate. That said, you’ll only be able to earn that $445 if you keep your money in the account for the full CD term. Take it out early and you’ll get hit with an early withdrawal penalty, so keep that in mind when comparing these two accounts.
