A $45,000 CD could earn more than $23,500 over 10 years
CBS News calculations show today’s long-term CD rates can beat the average savings account by thousands, if savers can leave the cash alone.
By Frankie Delgado · News Reporter
3 min read
A saver putting $45,000 into a long-term certificate of deposit this July could collect more than $23,500 in interest over 10 years, according to calculations reported by CBS News.
The math lands at a tricky moment for households. Borrowers are still dealing with costly rates on products such as mortgages and credit cards, but savers have a much friendlier setup. CBS News reported that many long-term CDs are paying 4% or more, and those rates can be locked in for years.
Regular savings accounts offer easier access to cash, but the return is far lower. Federal Deposit Insurance Corp. national rate data cited by CBS News puts the average savings account yield at 0.38% APY.
What $45,000 could earn in CDs
Using typical long-term CD rates available in July and assuming the money stays deposited for the full term, CBS News calculated these interest totals on a $45,000 deposit:
- 1-year CD at 4.11%: $1,849.50 in interest
- 3-year CD at 4.15%: $5,838.22 in interest
- 5-year CD at 4.20%: $10,277.85 in interest
- 10-year CD at 4.30%: $23,557.59 in interest
The longer commitments in the examples carry slightly higher annual percentage yields. CBS News reported that banks often pay more when depositors agree to leave money untouched for a longer stretch.
The bigger boost comes from compounding. In the 10-year example, the account earns interest on the original deposit and on the interest added along the way. That is why the 10-year CD earns more than 12 times the interest of the 1-year CD in the CBS News calculation.
The savings account comparison
The gap gets wide quickly when the CD examples are measured against an average traditional savings account.
At 0.38% APY, CBS News calculated that a $45,000 savings balance would earn roughly $171 over one year. The 1-year CD example at 4.11% would earn $1,849.50, leaving the CD saver more than $1,678 ahead over the same period on the same deposit.
Over five years, the average savings account would generate about $861 in interest, according to the CBS News comparison. The 5-year CD example at 4.20% would produce $10,277.85.
Over 10 years, the average savings account would earn roughly $1,739, CBS News reported. The 10-year CD example would earn more than $23,500, a difference of nearly $21,800.
The catch: access
The tradeoff is control of the cash. CBS News noted that a traditional savings account gives account holders access to funds, while a standard CD generally requires the money to remain in place until maturity.
Savers who pull money from a CD early typically face an early withdrawal penalty, according to CBS News. That makes the term choice important, especially for anyone who may need the $45,000 before the CD matures.
For savers who are confident they can leave the money alone, the July CD examples show a clear interest advantage over the average traditional savings account. CBS News also advised comparing rates across banks and checking the terms before opening an account, since small APY differences can add up over several years.
This story draws on original reporting from CBS News.