Why you should put $10,000 into a short-term CD right away

A certificate of deposit is a great way to stash money you don’t think you’ll need access to for a while. It’s safe and secure, plus the interest rates are generally higher than you’ll get with other savings products. CDs can offer these higher rates because the saver agrees to keep the money in the bank for a predetermined period, generally between three months and five years. With rates high but looking like they might soon start to come down, now is the perfect time to put a big chunk of change into a short-term CD and make a little bit of interest with virtually no downside.

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Why you should put $10,000 into a short-term CD right away

If you have $10,000 sitting in your savings account earning you no interest, now is the perfect time to move that money into a short-term CD and earn a bit of cash. Here’s why:

Rates are high – but may not be for long

Right now, you can get a very good interest rate on a short-term CD. For a 3-month CD, you can get returns of up to 5.10%. For a six-month CD, you could earn up to 5.50% interest. If you want to keep your money in the CD for a year, you can get a rate of up to 5.66%.

These rates are currently because of repeated actions by the Federal Reserve over the past 18 months to raise the federal funds rate in an attempt to fight inflation. While the Fed does not directly set the rates for consumer savings products like CDs, the interest rates offered by banks tend to track alongside what is set by the Fed.

Recently, though, the Fed announced that it was leaving rates paused for the third consecutive meeting. And rate cuts could well be coming in 2024. This, in turn, could cause banks to start lowering the rates they offer for CDs.

Find a short-term CD offering high rates now.

CD rates are locked in 

One of the best things about saving with a CD is that your interest rate is locked in when you open the account. Even if the bank dramatically cuts rates just a month afterward, you’ll still get the rate offered to you when opening for the entire term of the CD.

The tradeoff is that you don’t have access to the money during the term of the CD. Taking money out early normally results in substantial penalties. While this can be a bit scary, short-term CDs allow you to stash cash for a bit without having it locked away for too long.

Your interest payments will be solid and your principal secure

While a short-term CD isn’t going to net you a fortune, it will allow you to have your money work for you in a way it wouldn’t if it were sitting in a checking account or regular savings account.

If you put $10,000 into a 3-month CD with an interest rate of 5.10%, your total interest earned would be around $125. For a 6-month CD earning interest at 5.50%, you’d end up with around $270 in interest. Finally, if you put your money into a 1-year CD offering a rate of 5.66%, you’d earn around $566 in interest.

On top of that, your money will be safe in a CD, unlike in more riskier options like investing in the stock market. Even if the bank you use fails, CDs are insured by the FDIC for up to $250,000, so you won’t lose any money below that threshold.

The bottom line

Interest rates for short-term CDs are very high right now – but they might start to go down soon. Putting $10,000 into a short-term CD right offers solid – if perhaps not spectacular – returns for virtually no risk. If you have money you don’t think you’ll need to access imminently, a short-term CD is a great choice.