This Is How Much Money You Can Make With $20K in a CD
KEY POINTS
- A $20,000 initial deposit in a CD could yield between $260 and $4,700, with longer terms paying out significantly more.
- Short-term CDs have higher APYs, but long terms could guarantee high interest rates for a longer period.
Certificates of deposit (CDs) are all the rage among savers right now. With CD rates on all terms still hovering between 4% and 5.5%, many people have a unique opportunity to lock in a competitive APY before rates start to drop. For those who have higher sums to invest, like $20,000, a CD could yield a hefty amount over long periods -- some even paying out $1,000 annually. If you have $20,000 to invest, let's take a look at how much interest a CD could generate for you.
A $20,000 initial deposit could yield roughly $4,700, depending on the term
First off, keep in mind that the longer your CD term, the more you stand to gain on CD interest. That's because CDs -- at least those offered by banks -- grow by compound interest. As your initial deposit sprouts interest, that interest is added back to the pot, thus producing more interest at an accelerated pace. With that in mind, here's how much you could earn on different CD terms with a $20,000 deposit.
| CD term | APY | Yield on $20,000 |
|---|---|---|
| 1-year Sallie Mae CD | 4.10% | $1,050 |
| 2-year Bread Financial CD | 3.85% | $1,903.24 |
| 3-year Quontic CD | 3.25% | $2,757.86 |
| 4-year Bread Financial CD | 3.50% | $3,532.45 |
| 5-year Quontic CD | 3.00% | $4,686.05 |
Now, if you didn't want to invest in long-term CDs (those that have a maturity longer than 12 months), you could also invest in short-term CDs. Here's how much you could earn on some of the top short-term CDs on the market today.
| CD term | APY | Yield on $20,000 |
|---|---|---|
| 3-month Banc of California CD (via Raisin) | 5.28% | $258.93 |
| 6-month Quontic CD | 4.25% | $498.78 |
| 8-month Southwestern National Bank (via Raisin) CD | 5.22% | $690.08 |
Although short-term CDs technically have higher rates right now, there's no guarantee that the same rate (or a similar one) will be available when the term ends. You might snag 5.22% on an 8-month CD. But eight months from now, the interest rate environment could look very different. If you wanted to renew your term and ongoing rates for, say, a 1-year CD fell to 4%, you might have been better off getting a 2-year CD to begin with.
All in all, if you have $20,000 to deposit in a CD, you could still earn a decent amount of interest on any of the best CDs. Just be diligent with your CD shopping, as you don't want to lock into a rate that's lower than others for the same term. Take a look at our list of the best CDs to see which rates are competitive and look into one before they start to drop.
Our Research Expert
Steven Porrello writes about personal finances topics ranging from credit card offers to Costco deals to choosing the best places to park your cash.
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