How to Make Sure CD Rates are Worth Your Investment

May 7th 2016

Consult with your financial adviser or bank to find out if investing in a CD is right for you. Compare the amount of money you invest versus the amount you have on hand to see if the investment remains worth the wait.

Compare Rates to Normal Savings

Compare CD rates to those of normal savings, and then look at the time frame needed to reach certain goals. For example, a $1,000 investment in a savings account with 0.85 percent interest earns $43.29 after five years. A five-year CD with 1.8 percent interest gives you $93.30 on top of your principal. You get an additional $50 over five years with a CD. You may have to find longer-term CDs with higher interest rates to make the investment worthwhile.

Early Withdrawals

The downside to a higher interest rate revolves around penalties for withdrawing early from your CD. Penalties may include between six to nine months of interest. The $50 extra you earned by having a CD instead of a savings account may disappear entirely if you need the money sooner than five years. Have a backup plan for emergencies so your investment pays off later.


One advantage to certificates of deposit include stability within the investment market. You probably do not need to worry about stock market crashes, oil prices, the bond market or mutual funds while your money sits in the bank. Interest rates set by the Federal Reserve may raise or lower the rate of return on CDs. Examine the current climate for savings versus investments in stocks, bonds or mutual funds to see if a CD remains worth your money. Make sure you have the time to wait on a CD to mature.


Investing a lot of money upfront represents one of the best ways make decent money on a certificate of deposit. Compare $20,000 among several investment opportunities. At 0.06 percent for a standard savings account, you earn $12 after one year and $60 after five years on a $20,000 investment. A jumbo CD at 0.75 percent for 60 months earns $761 on that initial $20,000. If you have extra money and can wait, CDs can really pay off compared to regular savings accounts. The more money you invest, the greater your cumulative return.


You do not have to keep your investments in local banks. Research the best CD rates across the country. Find out when, and if, the Federal Reserve may raise interest rates. has a database that searches the highest-yield CD rates available on the market. Some rates could go higher than 1 percent on investments of $1,000, $5,000, $10,000 or higher. Many banks have online accounts that let you monitor how much money your CD has accrued over time.


Certificates of deposit represent longer-term financial investments than simple savings accounts. An investor agrees to leave a minimum amount of money in a special bank account for a certain length of time. At the end of the time period, the investor may withdraw all, part or none of the principal and interest. Discover what you need to do to make your CD worth it.

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