A certificate of deposit (CD) is an easy and safe way to make your money work for you. While CDs can be a smart choice at any time, this is an especially good time to put some money into one, as the interest rates offered by banks are a lot higher than they were just a couple of years ago. 

That might not be the case much longer, though, as it’s unclear what may happen with interest rates in the future. So, if you want to maximize your returns, opening a CD quickly may be important. And, one of the best things about using a CD is that you can know in advance exactly how much interest you’ll earn, based on the term of the CD and the interest rate you are offered. 

With that in mind, here’s how much interest you might stand to earn if you were to deposit $20,000 into a 3-year CD right now.

Ready to open a CD and start earning interest? Find the best CD offer for you here.

Why you should put $20,000 into a 3-year CD right now

If you have $20,000 sitting in your checking or regular savings account and want a safe, efficient way to earn interest, a 3-year CD is a solid option. Here’s why you may want to consider a 3-year CD right now:

Interest rates are high – but that might not last

As noted, CD interest rates are high right now. You can currently get interest rates of up to 4.85% on a 3-year CD. 

The reason rates are so high right now is that the Federal Reserve has raised the federal funds rate several times in the last 18 months in order to fight inflation. While consumer savings rates are not set by the Fed, the interest rates offered by banks tend to track alongside what the Fed sets. 

One thing to note is that top CD rates may be easier to find at online-only banks. Without the overhead of brick-and-mortar locations, these online-only financial institutions can afford to offer higher rates to their customers. 

The days of high interest rates for CDs may soon come to an end, though. The Fed’s fight against inflation has largely worked, and it has paused the federal funds rate for three consecutive meetings. The Fed has also indicated that cuts may be coming in 2024. If that happens, it could cause CD rates to fall as well, so now could be the time to get in on the action.

Open a CD and start earning interest today. 

Your rate will not change

One of the best reasons to open a CD is that your rate will not change for the entire term. For example, if you open a 3-year CD today with an interest rate of 4.85%, you’ll earn interest at that rate for the entire three-year CD term. What that means is that even if your bank slashes rates on new CDs, your rate won’t change during the CD term. 

It’s worth noting that rates for high-yield savings accounts are also high right now, but those rates are variable. So, if you deposit your money in this type of account, you’ll earn less interest if or when your bank cuts interest rates for high-yield accounts. 

There is a trade-off, though. With a high-yield savings account, you can access your money at virtually any time. With a CD, you agree to keep the money in the bank for the entire term of the CD, and there are generally steep penalties for early withdrawals. So if you’re considering putting $20,000 into a 3-year CD, make sure you are sure that you won’t need access to the funds for the entire three years.

Your principal is secure

Since CDs use fixed rates, you can calculate the amount of interest you will earn throughout the life of the account. If you put $20,000 into a 3-year CD with an interest rate of 4.85%, you’d earn a total of $3,053.42 in interest at the end of the three years.

And, your principal — which is the initial $20,000 you deposit — will be safe. The NCUA and the FDIC insure CDs at up to $250,000 per depositor, per account. So while you may stand to earn more by investing in the stock market or another more risky asset, you also face the risk of losing some or all of your investment. 

The bottom line

If you put $20,000 into a 3-year CD, you could earn more than $3,000 in interest by the end of the term, depending on the interest rate you get. And, a CD is safe and secure thanks to the insurance it comes with. Plus, rates are high right now, but that could change soon depending on what actions the Fed takes in 2024, so now could be the right time to open a CD and start earning interest.