Turn your refund into more money with this strategy

Here's How Much You Could Earn by Depositing Your Tax Refund in a CD

Turn your refund into more money with this strategy

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If you're expecting a tax refund this year, you may already be counting the ways you could spend it. However, you can also do something nice for "future you" by using your refund strategically.

One smart idea? Putting that cash in a low-risk investment account called a certificate of deposit. Whether you're saving for a down payment on a home, planning for retirement or creating a vacation fund, depositing your tax refund into a CD means your money's in a safe place -- and it will grow in value over time.

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How much can your refund earn in a CD? Let's take a look.

Read more: Expecting a Tax Refund? 6 Expert-Approved Ways to Use Your IRS Money This Year

To give you an idea of how your tax refund can grow in a CD, here's how much you could earn by depositing the average refund amount -- $3,324, as of March 7, 2025, according to the IRS -- in today's top CDs.

(Note: Different banks have different rates, so do some research and compare your options to find the best account for you.)

Here's how much you could earn by depositing your tax refund in a CD

Term	Top APY	Bank	Interest earnings	CD value at maturity
6 months	4.65%	CommunityWide Federal Credit Union	$76.40	$3,400.40
1 year	4.45%	CommunityWide Federal Credit Union	$147.92	$3,471.92
3 years	4.15%	America First Credit Union	$431.25	$3,755.25
5 years	4.20%	America First Credit Union	$759.19	$4,083.19

APYs as of March 24, 2025, based on the banks we track at CNET. Earnings are based on APYs and assume interest is compounded annually.

You could earn even more if your refund amount is larger than the average. However, even a small tax refund will grow if you deposit it into a CD.

It will also be safe from temptation. Dipping into your funds before the term is up results in an early withdrawal penalty. This can give you pause and prevent you from making a dent in your savings.

What to consider before putting your refund in a CD

Depositing into a CD isn't the only smart way to use your tax refund. Consider these things to determine the best use of your money.

How soon you may need the money

When you put your money into a CD, be prepared to leave it there for the full period. Taking it out too early results in fees that chip away at your earnings. There are several terms to choose from, ranging from a few months to several years, so be sure to pick one that fits your savings timeline.

If you're aiming for more liquidity and your emergency fund is low right now, it may be better to put your cash in a high-yield savings account. HYSA rates are often competitive with CD rates, and you'll be able to withdraw your money whenever you need it, penalty-free.

Your refund amount

Some CDs require a minimum deposit, which can range from $500 to $1,000. If you received a smaller tax refund this year, it could affect your CD options.

Your financial situation

Earning higher interest from a CD may be appealing, but if you have other financial priorities, depositing your refund in a CD may not be the best option. If you have high-interest debt from a credit card or loan, prioritize paying that down first. Otherwise, you could pay more in interest charges than you'd earn from a CD.

Put your refund to work for you

Depositing some or all of your tax refund into a CD allows you to turn that money into even more money. It's a smart way to reach your savings goals faster and set yourself up for a better financial future. And who doesn't want that?