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If you’ve been able to save up $10,000 or more in today’s economy, then you’re going to want to get as much out of that money as possible. Some savers may find it valuable to play the stock market, but with uncertainty there elevated and predictions varied for long-term success, that may not be a risk worth taking. And with select savings vehicles still offering interest rates in the 4% to 5% range, it’s a risk many don’t need to take right now, especially when considering a certificate of deposit (CD) account.
Sure, CD interest rates aren’t quite as high as they were in 2023 or 2024, but they’re still many times higher than they were five years ago. And CD rates are fixed, meaning savers will earn those high returns even if rate cuts are issued during the CD term. To get a better idea of the potential return on your savings deposit, then, it may be worth comparing the interest-earning potential of today’s top CD accounts versus what can be secured with a traditional saving account at the same time. Below, we’ll calculate the interest.
See how much more money you could be earning with a top CD account here.
$10,000 CD vs. $10,000 traditional savings account: Here’s which earns more now
When comparing an account with a fixed rate of interest versus one with a variable one, it can become difficult, if not impossible, to determine the interest-earning potential of both. After all, a variable interest rate means returns will fluctuate over time, so it’s not a true apples-to-apples comparison. And that’s the case here as a CD rate is fixed while a traditional savings account rate is variable.
But unlike when comparing a CD against a high-yield savings account or a money market account, matching it up against a traditional savings account clearly underlines the benefit of the latter type, thanks to an average traditional savings account rate under 0.40% now. In other words, even if rates on the account were to change over time, as they inevitably will, they’re highly unlikely to rise high enough to be even competitive with the top CDs, let alone supersede them. Here’s what the returns would look like now, assuming the traditional account rate remains the same for the full time frame:
- $10,000 6-month CD at 4.49%: $222.04 for a total of $10,222.04
- $10,000 6-month traditional savings account at 0.38%: $18.98 for a total of $10,018.98
- Difference between both: The CD earns $203.06 more.
- $10,000 9-month CD at 4.31%: $321.54 for a total of $10,321.54
- $10,000 9-month traditional savings account at 0.38%: $28.49 for a total of $10,028.49
- Difference between both: The CD earns $293.05 more.
- $10,000 1-year CD at 4.40%: $440.00 for a total of $10,440.00
- $10,000 1-year traditional savings account at 0.38%: $38.00 for a total of $10,038.00
- Difference between both: The CD earns $402 more.
- $10,000 18-month CD at 4.16%: $630.45 for a total of $10,630.45
- $10,000 18-month traditional savings account at 0.38%: $57.05 for a total of $10,057.05
- Difference between both: The CD earns $573.40 more.
So, no matter the CD term, the account still earns savers hundreds of dollars more than a traditional savings account will if opened now. And the former account returns are guaranteed, while the minimal savings account one could fall even further, especially over one year or longer. Comparing these two account options, then, it becomes clear that the home for your $10,000 deposit should be a CD.
Lock in a high rate on a CD here now.
The bottom line
A CD comes with substantially higher interest rates than traditional savings accounts right now, making them a clear choice to park $10,000 or more of your money in today’s economy. Just be sure to deposit an amount that you can comfortably afford to part with for the full CD term to avoid having to pay an early withdrawal penalty to regain access to your funds. And, if you have smaller amounts of money in a traditional savings account, consider moving it out and into a CD or high-yield savings account instead to exploit this high-rate climate while still advantageous for savers.
