This Is How Much Money You Can Make With $20K in a 5-Year CD

This Is How Much Money You Can Make With $20K in a 5-Year CD It’s how we make money. But our editorial integrity ensures that our product ratings are not influenced by compensation. APY = Annual Percentage Yield. Image source: Getty Images There's a huge variance in 5-year CD rates right now. On the high end, some top online banks are offering around 3.75% APY on a 5-year CD . That would mean roughly $4,000 in interest upon maturity with a $20,000 deposit. But on the lower end, some banks are paying less than 1.00% APY. At that rate, your total earnings would be just over $1,000 -- even though your money is tied up for the exact same five years. That's why CDs aren't a "set it and forget it" decision. If you're planning to park real money in a CD, it genuinely pays to shop around. How much $20K can earn in a 5-year CD A certificate of deposit (CD) pays a fixed APY for a set term. That means you know exactly how much your money will earn if you left it untouched for the entire term. Here's what $20,000 looks like in a 5-year CD at different rates: APY Total Interest Earned 1.50% ~$1,560 2.50% ~$2,630 3.50% ~$3,740 3.75% ~$4,030 Right now, the national average APY for a 5-year CD is just 1.34%, as many big banks are offering extremely low rates that drag the average down. If you simply open a CD at the bank you already use, you might end up earning closer to $1,500. But if you shop around and land a rate near 3.50%-3.75%, you're looking at roughly $4,000 in interest instead. If you're shopping around, Synchrony Bank is worth a look. It offers high CD rates across multiple terms and $0 minimum balance requirements. Check out our full Synchrony Bank CD review page for a full list of available rates and terms . Why a 5-year CD works for patient savers A 5-year CD is best for money you don't want to risk. If you want a predictable return and already have a plan for this cash in about five years, a CD does exactly what it promises. You lock in a fixed APY and know, down to the dollar, what you'll earn. And it's an especially great move in a rate-cutting cycle like the one we're in now. Savings and money market rates can drop as the Fed lowers core interest rates. But a CD lets you lock in today's higher yields before they are no longer available. I also like 5-year CDs for the "no-stress" portion of savings. This isn't money you're trying to grow aggressively. It's money you're protecting while still earning a meaningful return. What to keep in mind CDs are simple, but they're not completely hands-off. First, early withdrawal penalties matter. Most 5-year CDs charge several months or even up to a year of interest if you break the CD early. That's the trade-off for the...

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