How Much Interest Could You Earn on a $250K High-Yield CD Over 10 Years? It’s More Than You Think
Although consumer prices and inflation are still at a frustratingly high levels, the Federal Reserve has vowed to hold out on cutting its key rate until it sees a significant pressure drop in core inflation (the change in the costs of goods and services, excluding those from the food and energy sectors).
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While elevated interest rates are impacting borrowers’ ability to pay their mortgages and loans, those willing to leave their money alone for a period of time can earn more than they normally would when interest rates are low.
Now is a great time to invest in a certificate of deposit (CD). In exchange for storing your money longer with a financial institution, you’ll get competitive rates and flexible term options. For those is a position to save, buying a short- or long-term CD will provide guaranteed growth and complete protection against the variability of the markets.
CD rates have increased considerably alongside Fed rate hikes since 2022. According to Fortune, “1-year CD rates have increased more than twelve-fold, with 3-year and 5-year CDs up nearly six-fold and five-fold, respectively.”
Although the Fed is taking longer than expected to cut the benchmark rate, waiting until it does to buy a CD will hurt your chances at earning high interest. Right now, the best CD rates range from around 3.00% to 5.30% annual percentage yields (APYs), depending on term.
How Much Can I Earn Investing $250,000 in a 10-Year High-Yield CD?
Historically, longer-term CDs typically have higher interest rates than short-term CDs, because banks want you to keep your money with them for an extended period of time. However, the opposite is true right now.
CDs and savings accounts are influenced by the federal funds rate, so banks are offering higher rates on profitable short-term CDs and are tentative on extending the same high yield APY on long-term CDs because the federal funds rate could drop during a longer CD lifespan. Once the Fed starts cutting rates, banks will follow suit and CDs with a length of multiple years will have better APYs.
But long-term CDs make a lot of sense right now and many banks are offering ones with very competitive APYs. Locking in a 5-year or 10-year at a high APY will ensure that same fixed rate in five or 10 years, when banks might be paying far less.
For example, using Forbes’ CD Calculator, if you deposited $250,000 into a Discover Bank CD (which is offering a 10-year CD with an APY of 3.75% right now) and locked it in for a 10-year term, you will earn a total interest of $111,260.99 in 10 years time, making the CD’s value at the end of term $361,260.99. That’s more than tidy sum for a healthy starting deposit and some patience.
The Best CD Rates for June
Here is what Forbes has identified as the best yielding CDs for June, including short- and long-term CDs, jumbo certificates, promotional CDs and CD ladders.
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Best 3-Month CDs: EverBank Basic CD: 3.95% APY
Best 6-Month CDs: CommunityWide Federal Credit Union CW Certificate Account: 5.30% APY
Best 1-Year CDs: Bread Savings Certificate of Deposit: 5.25% APY
Best 18-Month CDs: Synchrony Bank Certificates of Deposit: 4.50% APY
Best 2-Year CDs: Marcus by Goldman Sachs High-Yield Certificates of Deposit: 4.20% APY
Best 3-Year CDs: Quontic Bank Certificate of Deposit: 4.40% APY
Best 5-Year CDs: First National Bank of America Certificates of Deposit: 4.50% APY
Best 7-Year CDs: PenFed Credit Union Money Market Certificates: 3.00% APY
Best 10-Year CDs: Discover Certificates of Deposit: 3.75% APY
Best Jumbo Certificates: Connexus Credit Union Share Certificate: 3.51% to 5.06% APY
Best Promotional CDs: Consumers Credit Union Certificate Account: 0.50% to 5.00% APY
Best CD Ladders: EverBank Basic CD: 3.90% to 5.05% APY
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This article originally appeared on GOBankingRates.com: How Much Interest Could You Earn on a $250K High-Yield CD Over 10 Years? It’s More Than You Think