How much will a $5,000 CD make in a year? (2024)

FAQs

How much will a $5,000 CD make in a year? ›

Depending on the bank, a $5,000 CD deposit will make around $25 to $275 in interest after one year. Online banks and credit unions pay appealing CD rates, and you can earn more interest than at big brick-and-mortar banks. When choosing a CD, consider other factors beyond the interest rate of an account.

The deposit amount won't be prohibitive

But you'll still earn hundreds and possibly thousands of dollars worth of interest with that manageable deposit. For example, a $5,000 deposit into a 5-year CD with a rate of 4.35% (available right now) will result in a $1,186.32 profit upon maturity.

Suppose you invest $5,000 in a five-year CD paying 5% per year, with no compounding, and you make no additional contributions along the way. You would earn $250 per year, and your $5,000 would become $6,250.

With a rate that high, a $10,000 investment in a 5-year CD could potentially grow to over $12,000 by the end of the term — and that's without any additional contributions. That means the returns on your CD will significantly outpace the returns typically offered by traditional savings accounts, averaging about 0.45%.

However, our opinions are our own. See how we rate banking products to write unbiased product reviews. Depending on the bank, a $5,000 CD deposit will make around $25 to $275 in interest after one year.

The cons of CDs

With a savings account, the money is easily accessible in case of a financial emergency or a change in spending priorities. With CDs, you typically can't withdraw the money whenever you want—at least not without paying a penalty.

Key takeaways. Interest earned on CDs is considered taxable income by the IRS, regardless of whether the money is received in cash or reinvested. Interest earned on CDs with terms longer than one year must be reported and taxed every year, even if the CD cannot be cashed in until maturity.

That said, here's how much you could expect to make by depositing $20,000 into a one-year CD now, broken down by four readily available interest rates (interest compounding annually): At 6.00%: $1,200 (for a total of $21,200 after one year) At 5.75%: $1,150 (for a total of $21,150 after one year)

How can I double $5000 dollars? ›

How can I double $5000 dollars? One way to potentially double $5,000 is by investing it in a 401(k) account, especially if your employer matches your contributions. For example, if you invest $5,000 and your employer offers to fully match at 100%, you could start with a total of $10,000 in your account.

How can you make $5,000 turn into $10,000? Turning $5,000 into $10,000 involves investing in avenues with the potential for high returns, such as stocks, ETFs or real estate. Another approach is to use the money as seed capital for a profitable small business or side hustle.

The future value will be $6,802.44. Given information: Present value = $5,000. Interest rate = 8%

Unlike how the stock market or a Roth IRA can lose money, you typically cannot lose money in a CD. There is actually no risk the account owner incurs unless you withdraw money before the account reaches maturity.

For example, you could earn a 4.61% APY by depositing $10,000 into a 3-year CD right now. If you chose to do so, you would earn $1,447.74 in interest - bringing your total balance to $11,447.74 after three years. You could also lock in your rate for longer, albeit at a slightly lower APY.

If interest rates fall before the CD expires, the bank is out of luck and must give you the rate it quoted. If rates climb, you're stuck with the lower rate you agreed to when you opened the account. And if you take your money out before a CD matures, you'll pay a penalty -- typically three months of interest.

If you don't need access to your money right away, a CD might be a good savings tool for you in 2024 while average interest rates remain high. CD interest rates are high in 2024 — higher nationally, on average, than they've been in more than a decade, according to Forbes Advisor.

Minimum and maximum amounts for CD investments

You can expect a minimum CD opening deposit of at least $500 at most banks, though that could rise to $2,500 or more for certain accounts. For example, CIT's Jumbo CDs require a minimum balance of $100,000. CDs with higher minimums often pay higher APYs.

In summary, a certificate of deposit gives you steady and safe returns. Investing $15,000 in a CD could lead to substantial gains, regardless of the CD's length. However, make sure you won't need that money while the CD is active because withdrawing early usually incurs hefty penalties.

Are CDs safe if the market crashes? Putting your money in a CD doesn't involve putting your money in the stock market. Instead, it's in a financial institution, like a bank or credit union. So, in the event of a market crash, your CD account will not be impacted or lose value.