How much money should I put in a CD? (2024)

The amount of money you should put in a certificate of deposit (CD) depends on numerous factors, ranging from how much you have to invest to how much the bank requires. You must typically make a minimum opening deposit, usually between $500 and $2,500, although some accounts don’t have this requirement.

Your financial circ*mstances and a few other key considerations can help you determine how much to keep in CDs and take advantage of today’s high interest rates.

How much money should I keep in a CD?

The answer to how much money you should put in a CD is personal. Consider these issues to figure out what is best for you:

Emergency savings: If you don’t have an emergency fund, focus on building one before you put money in a CD. Your savings should be easily accessible instead of in a CD, which can tie up your cash.

Access to funds: Traditional CDs are not liquid investments, which means you’ll incur penalties if you cash out early. Keep that in mind when deciding how much money to invest.

Financial goals: If you are saving toward a particular goal with a timeline, such as a wedding, that can help you determine how much to put in the CD and for how long.

For younger people, it might make more sense to put more of their portfolio in stocks or other riskier investments with higher upside for a long-term return, said Cetin Duransoy, CEO at Raisin US, an online savings platform.

“The older you get, the wiser it is to have a larger percentage of your portfolio in stable, low-risk investments like high-yield CDs, depending on your fixed income requirements,” he said.

Balance requirements: Banks may set minimum opening deposit requirements and account limits. These vary by account and bank so be sure to check before you open a CD.

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 contrast, regular savings accounts typically have minimal or even no opening deposit requirements.

You might also face higher minimums for special accounts, such as a step-up CD that lets you adjust the interest rate at scheduled times before the maturity date.

In terms of maximum deposits, every bank lays out its own rules. Banks might impose maximum limits per CD account or per account type, such as jumbo or step-up CDs. Capital One’s 360 CD has no minimum deposit but may not exceed $1 million, for instance.

Risks and benefits of investing in CDs

CDs are considered very safe investments because your principal is guaranteed and you get a guaranteed annual percentage yield (APY) for the term of the CD. The only exception is if you invest in a callable CD that allows the bank to “call back” the CD before its maturity date, limiting your earnings. In this case, the issuing bank can cancel the CD at the callable date, which means you get the principal and interest accrued to that point, but lose out on future interest.

Here are some of the pros and cons of investing in CDs:


  • Guaranteed income at a fixed rate
  • Higher APYs than regular savings accounts
  • Multiple term options that can range from three months to 10 years or more
  • Offers low risk, with deposits backed at federally insured institutions


  • Lacks flexibility, including the ability to make withdrawals and transfers as needed
  • Often comes with early withdrawal penalties
  • Carries interest rate risk — meaning returns may not keep up with inflation
  • Produces lower returns than higher-risk investments

How interest rates affect CD investments

Obviously, you want the highest possible rate when you open a CD because the higher the rate, the higher the return. In terms of what affects interest rates, some of the main factors are:

  • The overall market rate: This is determined by the Federal Reserve. When the Fed lowers its rates, CD rates usually go down. When it raises rates, CD rates usually go up
  • The type of bank: Many online banks offer higher interest rates than traditional brick-and-mortar banks because they have lower operating costs
  • The type of CD: Depending on the bank, you might get higher interest rates with longer-term CDs, but that’s not always the case. You may find higher rates on short-term CDs — especially if the overall market rate is high. You can also get higher rates on special CDs

Now is a good time to invest in CDs because of a series of Fed interest rate hikes over the past couple of years.

“With interest rates as high as they are today and likely to come down in the near future, it may make sense for savers from any generation to lock into rates now and devote a higher percentage of their portfolios to CDs to generate guaranteed, predictable returns to help augment their entire portfolio,” Duransoy said.

Penalties of early CD withdrawal

One of the main downsides of a CD is that you usually have to pay an early withdrawal penalty if you access the money before the term ends.

The amount of the penalty depends on the bank and the CD terms. Federal law sets a minimum penalty on early CD withdrawals but there is no maximum penalty.

If you withdraw money within the first six days after deposit, the penalty is at least seven days of simple interest. In other cases, your penalty may be a portion of accrued interest. Review your CD terms to find how much you might be penalized.

Renewing vs. cashing out CDs

Once a CD hits its maturity date, you usually have the option to renew it, deposit the money into another bank account or cash out. Your decision depends on your financial needs and goals.

For example, if you used the CD to save for a specific goal, then you will probably want to cash out and put the money toward that goal. But if you used the account to build your savings, then your decision about whether to renew or cash out depends on the APY.

If the CD doesn’t offer a competitive APY, then you may want to cash out and invest the money where you can get a better return. You may want to renew the CD, however, if the APY is higher than average.

If you’re not sure what to do, most CDs have a 10-day grace period after the CD matures, which gives you some time to think it over. If you do nothing, then the bank might renew the CD automatically at the same term.

Frequently asked questions (FAQs)

Withdrawing money before the maturity date can lead to an early withdrawal penalty. The penalty varies by bank and CD term.

Some banks impose a limit on how much you can invest in a CD. Limits depend on the bank and account type.

No, different banks offer different interest rates for CDs. Even within the same bank, you will likely find different interest rates for different CD terms.

Interest income is taxed at the same rate as your ordinary income, so that means if your income puts you in the 12% tax bracket, then 12% of your CD interest income will go toward federal income taxes. Your bank or credit union should issue a 1099-INT statement showing how much interest you earned on the account for the year.

In nearly all cases, you can’t add more money to the CD before its term has ended. The exceptions are add-on CDs offered by some banks, but these are rare.

How much money should I put in a CD? (2024)


How much money should you put into a CD? ›

The amount of money you should put in a certificate of deposit (CD) depends on numerous factors, ranging from how much you have to invest to how much the bank requires. You must typically make a minimum opening deposit, usually between $500 and $2,500, although some accounts don't have this requirement.

How much does a $10,000 CD make in a year? ›

Earnings on a $10,000 CD Over Different Terms
Term LengthAverage APYInterest earned on $10,000 at maturity
1 year1.81%$181
2 years1.53%$308.34
3 years1.38%$419.74
4 years1.29%$526.07
1 more row
Mar 20, 2024

Is it smart to put money in a CD? ›

CDs are safe investments. Like other bank accounts, CDs have federal deposit insurance for up to $250,000 (or $500,000 in a joint account for two people). There's no risk of losing money with a CD, except if you withdraw early.

How much will a $500 CD make in 5 years? ›

This CD will earn $117.15 on $500 over five years, which means your deposit will grow by 23.4%.

How much does a $5000 CD make in a year? ›

How much interest would you make on a $5,000 CD? We estimate that a $5,000 CD deposit can make roughly $25 to $275 in interest after one year. In comparison, a $10,000 CD deposit makes around $50 to $550 in interest after a year, depending on the bank.

What is a disadvantage to putting your money into a CD? ›

One major drawback of a CD is that account holders can't easily access their money if an unanticipated need arises. They typically have to pay a penalty for early withdrawals, which can eat up interest and can even result in the loss of principal.

Is a CD worth it? ›

If you're looking for a safe way to earn interest on your savings, a certificate of deposit, or CD, is worth considering. CDs tend to offer higher interest rates than savings accounts. And today's best CD rates are far higher than the national averages.

Is a 6 month CD worth it? ›

You can access your cash after six months without the risk of an early withdrawal penalty. You may get a higher interest rate than a traditional savings account. Some of the best six-month CDs offer rates that are significantly higher than savings accounts at traditional, brick-and-mortar banks and credit unions.

How much does a $50,000 CD make in a year? ›

A short-term CD could yield $2,625 per year (for a 1-year CD)
TermAPY (currentYield on $50,000
3 months5.26%$682.50
6 months5.00%$1,250
9 months5.55%$2,081
1 year4.90%$2,625
Feb 10, 2024

Are CDs safe if the market crashes? ›

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.

Is a 12 month CD worth it? ›

A one-year CD typically offers a higher interest rate than shorter-term CDs, such as three-month CDs and six-month CDs. Offers higher interest rates than traditional savings accounts.

Why is CD not a good financial investment? ›

CD rates may not be high enough to keep pace with inflation when consumer prices rise. Investing money in the stock market could generate much higher returns than CDs.

Why should you put $5000 in a 6 month CD now? ›

Unlike traditional or high-yield savings accounts, which have variable APYs, most CDs lock your money into a fixed interest rate the day you open the account. That's why if you suspect that interest rates will soon drop, it can be a good idea to put money in a CD to preserve the high APY you would earn.

What if I put 5000 in a CD? ›

In terms of traditional bank CDs, however, the national average on a 12-month CD is 1.76%, according to the Federal Deposit Insurance Corporation (FDIC). That means that in one year, a $5,000 CD earning the average of 1.76% annual interest would earn $88 before taxes. CD interest is generally taxed as ordinary income.

Does a CD pay monthly? ›

CD rates are usually quoted as an APY, and banks and credit unions usually compound interest daily or monthly.

How much does a 1000 CD make in a year? ›

That all said, here's how much a $1,000 CD will make in a year, based on four possible interest rate scenarios: At 6.00%: $60 (for a total of $1,060 total after one year) At 5.75%: $57.50 (for a total of $1,057.50 total after one year)

How much does a 20,000 CD make in a year? ›

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)

Is it better to put money in a CD or savings? ›

A certificate of deposit offers a fixed interest rate that's usually higher than what a regular savings account offers. The tradeoff is you agree to keep your money in the CD for a set amount of time, typically three months to five years.

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