$40,000 6-month CD vs. $40,000 1-year CD: Which will earn more interest now?
Summary
A $40,000 deposit in a 1-year certificate of deposit (CD) will earn more interest than the same amount in a 6-month CD, despite very similar interest rates. The longer time period allows the money to grow more, even though short-term and long-term CD rates have become closer recently.Key Facts
- Historically, long-term CDs had higher interest rates than short-term CDs.
- Recently, many banks offer similar or sometimes better rates for short-term CDs.
- A 6-month CD at 4.10% for $40,000 pays about $811.76 in interest at maturity.
- A 1-year CD at 4.11% for $40,000 pays about $1,644 in interest at maturity.
- The 1-year CD earns $832.24 more than the 6-month CD, mainly due to the longer time period.
- Early withdrawal from a 1-year CD may lead to penalties that reduce or eliminate interest.
- Savers must balance the higher guaranteed returns of long-term CDs against the flexibility of short-term CDs.
- Online tools make it easier to compare CD rates and terms from different banks.
Read the Full Article
This is a fact-based summary from The Actual News. Click below to read the complete story directly from the original source.