$10,000 long-term CD vs. $10,000 short-term CD: Which earns more interest now?

The economic landscape of recent years has left millions of Americans struggling to cover their expenses, let alone build their savings. Thanks to the highest inflation rate in decades and a correspondingly elevated federal funds rate designed to combat it, Americans have had to contend with higher costs on everyday expenses and higher borrowing costs if they turned to credit cards, personal loans and other products. If you were able to save during this period, consider yourself slightly ahead. And if you were able to save a large, five-figure amount of money, like $10,000, then you’re in an even better position.

In this circumstance, you may be tempted to deposit it all into a certificate of deposit (CD) account. This unique savings vehicle comes with high rates right now and those rates are fixed for the full CD term, an attractive feature ahead of predicted rate cuts to come later this summer. But rates here vary based on the length of the CD term and aren’t as neatly aligned as they may have been in a different economy. Understanding this, then, savers would be better prepared by first calculating the interest-earning potential of both long-term and short-term CDs now. With a $10,000 deposit made now, specifically, which CD term would earn more interest? That’s what we’ll break down below.

See how much more you could be earning on your money with a high-rate CD here now.

$10,000 long-term CD vs. $10,000 short-term CD: Which earns more interest now?

It’s easy to determine the interest earnings on a CD thanks to that fixed rate. That said, rates on short-term CDs are a bit higher than they are on long-term ones now, a direct reversal of historic trends largely thanks to uncertainty over the future of interest rates. Here’s what each could earn now with a $10,000 deposit, assuming no fees or early withdrawal penalties are applied:

Long-term CDs:

• $10,000 18-month CD at 4.26%: $645.76 for a total of $10,645.76
• $10,000 2-year CD at 4.20%: $857.64 for a total of $10,857.64
• $10,000 3-year CD at 4.25%: $1,329.96 for a total of $11,329.96
• $10,000 5-year CD at 4.20%: $2,283.97 for a total of $12,283.97

Short-term CDs:

• $10,000 3-month CD at 4.40%: $108.23 for a total of $10,108.23
• $10,000 6-month CD at 4.49%: $222.04 for a total of $10,222.04
• $10,000 9-month CD at 4.26%: $317.83 for a total of $10,317.83
• $10,000 1-year CD at 4.40%: $440.00 for a total of $10,440.00

As can be seen, while short-term CD rates are consistently higher than long-term ones, thanks to the extended interest-earning time frame long-term CDs enjoy, the difference in the amount of money earned between the two accounts is stark. The optimal short-term CD return is $440, tied to today’s top rates, while the best long-term CD return is just under $2,300, making the latter type exponentially better for savers. That said, if you want to earn as much as you can with a CD with this deposit amount, it will require an elongated period to get it, so that sacrifice will need to be weighed carefully against the earnings that can be secured in just a few months.

Compare your top long- and short-term CD rate offers here to learn more.

The bottom line

Savers can earn hundreds of dollars in interest by depositing $10,000 into a short-term CD this July but they can earn thousands of dollars by making the same deposit into a long-term CD. Ultimately, the decision between both will come down to personal preference, budget and financial goals. With both offering elevated rates now but with the potential for these rates to decline later this year, savers will need to take a nuanced yet strategic approach. By doing so, they can better ensure CD account success this July and, potentially, for months or even years to come.