Is $10,000 Too Much to Put Into a CD With Rates Falling Below 5%?

Not long ago, CDs were paying 5%. And a lot of people rushed to open one while they could.

But ever since the Fed lowered its benchmark interest rate in mid-September, CD rates have been falling. So have savings account rates. And while you might still snag a CD in the 4% range, good luck finding that magical 5%.

You may be wondering if $10,000 is too much to put into a CD now that rates are lower. And the answer is, it depends.

Focus on your deposit, not the rate

CDs may not be paying 5% anymore, but today’s rates are close enough. And if you shop around for a CD, you may find a rate you’re happy with. Click here for a roundup of the top CD rates today.

Our Picks for the Best High-Yield Savings Accounts of 2024

Capital One 360 Performance Savings APY 4.00% Rate info See Capital One website for most up-to-date rates. Advertised Annual Percentage Yield (APY) is variable and accurate as of Oct. 23, 2024. Rates are subject to change at any time before or after account opening. Member FDIC.	APY 4.00% Rate info See Capital One website for most up-to-date rates. Advertised Annual Percentage Yield (APY) is variable and accurate as of Oct. 23, 2024. Rates are subject to change at any time before or after account opening.	Min. to earn $0
CIT Platinum Savings APY 4.70% APY for balances of $5,000 or more Rate info 4.70% APY for balances of $5,000 or more; otherwise, 0.25% APY Min. to earn $100 to open account, $5,000 for max APY Member FDIC.	APY 4.70% APY for balances of $5,000 or more Rate info 4.70% APY for balances of $5,000 or more; otherwise, 0.25% APY	Min. to earn $100 to open account, $5,000 for max APY
Western Alliance Bank High-Yield Savings Premier APY 4.81% Rate info The annual percentage yield (APY) is accurate as of October 21, 2024 and subject to change at the Bank’s discretion. Refer to product’s website for latest APY rate. Minimum deposit required to open an account is $500 and a minimum balance of $0.01 is required to earn the advertised APY. Min. to earn $500 to open, $0.01 for max APY Member FDIC.	APY 4.81% Rate info The annual percentage yield (APY) is accurate as of October 21, 2024 and subject to change at the Bank’s discretion. Refer to product’s website for latest APY rate. Minimum deposit required to open an account is $500 and a minimum balance of $0.01 is required to earn the advertised APY.	Min. to earn $500 to open, $0.01 for max APY

For this reason, the question you should be asking yourself isn’t whether opening a $10,000 CD makes sense now that rates are a bit below 5%. Rather, you should be asking whether opening a $10,000 CD makes sense at all.

When it pays to open a CD

Opening a CD is a good idea when you’re putting that money aside for a short-term goal. If you’re earmarking that money for a new car purchase in two years or a new home in four years, then a CD is a great idea. But if it’s money you don’t plan to use for about seven years or longer, then you’re generally better off investing it rather than limiting yourself to a CD.

The danger of investing money is that the value of your assets could decline. But you can lower that risk by investing over a long period, which allows you to ride out market downturns.

That’s why you shouldn’t invest money you might need in five years or less. That’s not necessarily enough time to recover from a stock market decline. But having a slightly longer period to work with makes stocks a more appropriate investment. And the more years you have, the better — not only for the purpose of limiting your risk, but for the purpose of growing your money.

Stocks may provide stronger long-term returns

Over the past 50 years, the S&P 500 has averaged an annual 10% return. That accounts for strong years and weak ones. You’re probably not even going to get 4% a year from CDs on a long-term basis. But for the purpose of illustrating an example, let’s say you do.

If you put $10,000 into a stock portfolio with a 10% return, in 20 years, you’ll have $67,275. If you put $10,000 into CDs with a 4% return, in 20 years, you’ll have a little under $22,000. Which sounds better to you? If it’s the first result, click here for a list of the best brokerage accounts so you can start investing immediately.

Make the right choice

If a CD is a better choice for your money than stocks, then there’s nothing wrong with putting $10,000 into one. But if stocks are a better choice given your savings timeline and goal, then put that $10,000 into a brokerage account. Doing so might leave you with a lot more money in the end.