A one-year CD can be a safe and worthwhile option these days for anyone with an extra $1,000 to invest. For many savers, 12 months isn’t too long to tie up a small amount of money, and such short-term CDs sometimes pay higher rates than various high-yield savings accounts.

Before committing your money to a CD, be sure to find one that earns a competitive annual percentage yield (APY). Here’s how much $1,000 can earn right now in a CD that pays a competitive yield, that pays the national average rate or that pays a rock-bottom rate typically offered by big brick-and-mortar banks.

Type of 1-year CD Typical APY Interest on $1,000 after 1 year Total value of CD with $1,000 opening deposit after 1 year
CDs that pay competitive rates 5.20% $52 $1,052.00
CDs that pay the national average 1.59% $15.90 $1,015.90
CDs from big brick-and-mortar banks 0.03% $0.30 $1,000.30

CDs that pay competitive rates are commonly found at online banks, which don’t have to maintain branches and often pass along the savings through higher deposit account rates.

National average 1-year CD rates

One-year CDs currently earn a national average APY of 1.59 percent. Overall, this average has either remained the same or increased since March 2022.

If you were to open a CD today that earns a 1.59 percent APY and deposit $1,000, in a year it would be worth $1,015.90 — as shown below:

Type of account: 1-year CD
Opening deposit: $1,000
APY: 1.59%
Total interest after 1 year: around $15.90
Total value of CD after 1 year: around $1,015.90

Bankrate’s CD calculator is a handy way to calculate the amount of interest your money will earn by the time a CD matures.

Competitive 1-year CD rates

You’ll earn a good deal more by choosing a bank that pays a competitive CD rate over one that just offers the national average rate. If you were to invest $1,000 in a one-year CD that earns a rate of 5.2 percent, you’d have around $1,052 when the CD matured.

Type of account: 1-year CD
Opening deposit: $1,000
APY: 5.2%
Total interest after 1 year: around $52
Total value of CD after 1 year: around $1,052

For perspective, depositing $2,500 into such a high-yield CD would earn around $130 in total interest over a year, while depositing $10,000 would earn around $520 in total interest.

1-year CD rates from big banks

Large brick-and-mortar banks are often known for paying rock-bottom deposit account rates. Examples of big banks and the APY they offer on one-year CDs include:

Chase: 0.01%
Bank of America: 0.03%
U.S. Bank: 0.05%

For perspective, a competitive CD with an APY of 5.2 percent is paying a rate that’s around 173 times the one paying 0.03 percent.

If you were to deposit $1,000 into a one-year CD that earns an APY of 0.03 percent, it would have earned only around 30 cents when it matures, as follows:

Type of account: 1-year CD
Opening deposit: $1,000
APY: 0.03%
Total interest after 1 year: around $0.30
Total value of CD after 1 year: around $1,000.30

History of one-year CD rates

The national average yield for CDs has been increasing steadily since 2022, along with the Federal Reserve raising its rates. The Fed increased rates at a pace last year unmatched since the 1980s, and it’s hiked rates three times to date in 2023.

However, the Fed is slowing down on raising rates, causing yields on CDs to start leveling off, according to Greg McBride, CFA, Bankrate chief financial analyst. For now, though, the average APY for a one-year CD is higher than it’s been in more than a decade.

When a one-year CD is a good idea

A one-year CD can be a way to earn a competitive, guaranteed rate on a deposit account, and you’re not tying up your funds for too long. These days, some one-year CDs even earn higher APYs than high-yield savings accounts.

Locking in your funds for a while can also be a good way to avoid making impulse purchases — especially if you’re saving the money for a specific goal.

When a one-year CD is not a good idea

If you’re looking for a place to keep your emergency fund, a CD is not the best choice, since taking money out before the term expires usually results in an early withdrawal penalty. A savings account is a better place for money you might need in a pinch.

Another example of when a one-year CD isn’t the best option is during a rising-rate environment. Most CDs have fixed rates, so you won’t be able to take advantage of higher rates down the line if you lock your money into a CD at today’s rate.

Are longer-term CDs a better investment?

If you’re considering going with a longer-term CD to earn a better rate, consider the fact that various one-year CDs are currently out-earning four-year CDs and five-year CDs. As such, it pays to research rates thoroughly before choosing the right CD for you.

Bottom line

When you’re looking for the best one-year CD, one of the biggest things to pay attention to is APY, since the interest earned can vary so much from bank to bank. While the national average is exponentially higher than the rate often paid by brick-and-mortar banks, the best rates can often be found at online-only banks. It’s well worth your time to shop around.

If you only have $1,000 to put into a CD — or if you choose not to devote more than that — pay attention to the minimum deposit required to open it, since some banks require a higher amount. While many banks have low minimum deposits for their CDs, it’s not unheard of to see a bank requiring as much as $10,000.

Once you know a CD’s APY, you can calculate the dollar amount you’ll have earned in interest at the one-year mark. Bankrate calculators come in handy for determining how much interest you’ll earn in places like savings accounts and CDs over time.