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Interest rates will remain elevated for a bit longer. That was one of the key takeaways on Wednesday after the Federal Reserve for the federal funds rate, keeping it at a range between 4.25% and 4.50%. It was the fourth such pause courtesy of the central bank this year after it embarked on a in the final months of 2024.
While a frozen Fed rate may not be the news borrowers were looking for, it's a positive for savers who have been accustomed to earning elevated returns on their money for the last few years. With a , in particular, not only have been high, but they're , meaning that the 4%-plus rate savers secured with a 1-year CD last July, remained the same into this month, even with those three rate cuts issued last year. Still, the interest rate climate is not what it was in 2023 or 2024, either. And opening a 1-year CD will require extended discipline to avoid having to pay an to secure early access to your funds.
To better understand the worth of this specific , then, it can be helpful to calculate the interest-earnings potential. And, thanks to that fixed rate, this is easy to do with precision. So, how much will a 1-year CD earn if opened this June? Depending on the amount deposited, savers could earn or even in interest.
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CD interest earnings are determined by a combination of three main factors: the amount deposited, the interest rate and the term (or length) of the CD account. While rates here have declined from where they were in 2023 and 2024, they're still high (particularly if you open a ). Here's how much it could earn, calculated against six different deposit amounts and two different rates (assuming no early withdrawal penalties are issued):
As can be seen, no matter the deposit amount, it can be advantageous to open a 1-year CD now. Not only will the returns be significant, but they'll be reliable thanks to that fixed rate. And because early withdrawal penalties could wipe out all or most of the interest earned to date, it will also encourage savers to keep their money in the account untouched, which they may not be incentivized to do in the same way they would with a or , both of which permit savers to make withdrawals and deposits as they would with traditional accounts.
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Depending on the amount deposited now, savers can still realize a substantial amount of interest on their money, even if it's not quite as significant as it was in 2023 and 2024. And with alternatives like high-yield savings and money market accounts utilizing variable rates and , a 1-year CD could be one of the better ways to grow your money in a relatively expedited timeframe.
