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If you thought the days of competitive interest rates on savings accounts were over, or at least temporarily on pause, events in recent weeks may have changed your mind. With unemployment rising, progress toward lowering inflation stalled and the Federal Reserve keeping interest rates on pause for yet another month, interest rates are actually holding steady. And while that may not be good news for borrowers, it can be very good news for savers, particularly those considering fixed-rate accounts like certificates of deposit (CDs).
CD interest rates in recent years surged as high as 6% and 7% with some banking institutions (online banks were especially competitive). And while those have since subsided, rates here remain competitive. With no rate cuts on the horizon, either, savers can take their time shopping around to find the highest rate account around now. This is especially important to do for those looking for a home for larger, five-figure amounts, such as $75,000. After all, to earn a big return with a CD you’ll need to commit to keeping the funds untouched for the full term – or risk having to pay an early withdrawal penalty, which can be steep on an account of this size.
To better determine the value of a $75,000 CD account, then, it helps to understand the interest-earning potential it now offers, especially if you’re just looking for a short-term home for your money. So, how much will $75,000 earn in a CD over the next 12 months? Thanks to the fixed rate the CD employs, the math is easy to understand. That’s what we’ll examine below.
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How much will $75,000 earn in a CD in 12 months?
CD interest rates vary based on the term (or length) of the account. Historically, this translated to higher rates on long-term CDs (which mature in 18 months or longer) and lower rates on short-term CDs, though that dynamic has been skewed a bit in recent years. Here’s how much $75,000 could earn in a CD in 12 months, calculated against three readily available rates, assuming no penalties are levied against the account:
- $75,000 1-year CD at 3.95%: $2,962.50 upon maturity
- $75,000 1-year CD at 4.00%: $3,000.00 upon maturity
- $75,000 1-year CD at 4.10%: $3,075.00 upon maturity
Savers, then, can earn between $2,960 and $3,075, approximately, with a CD account of this size by the time it matures in March 2027. And that’s guaranteed interest in a way that stocks and bonds cannot offer, and that high-yield savings and money market accounts, with variable interest rate structures, can’t either. Plus, CDs are safe and FDIC-insured up to $250,000 per account, so you’ll be completely covered with a $75,000 account. For all of these reasons, then, a CD may be worth considering now.
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The bottom line
A $75,000 CD account can produce around $3,000 in interest for savers over the next 12 months, making it a viable savings account option for those who don’t want to try their luck investing in today’s unpredictable economic climate. That said, CD interest earnings have tax considerations savers should understand, too. Consider speaking with a banking representative directly who can answer your questions and help you best take advantage of today’s still-elevated interest rate environment.