Certificates of Deposit (CDs) offer higher interest rates than savings accounts in exchange for locking up your money for a set term. This calculator shows exactly how much your CD will earn over its term and helps you compare different options.
How This Calculator Works
This calculator projects your CD earnings:
- Initial Deposit: Amount you're investing in the CD
- APY (Annual Percentage Yield): The interest rate including compounding
- Term Length: How long the CD locks your money (3 months to 5 years)
- Compounding Frequency: How often interest is calculated (daily, monthly)
- Final Value: What you'll receive at maturity
The Formula Explained
Future Value = Principal Ă— (1 + APY)^Years
For shorter terms: Future Value = Principal Ă— (1 + APY Ă— (Days/365))
APY already accounts for compounding, so the calculation is straightforward.
Step-by-Step Example
Comparing CD Terms
$10,000 deposit, comparing terms:
| Term | APY | Interest Earned | Final Value |
| 6 months | 4.50% | $224 | $10,224 |
| 12 months | 5.00% | $500 | $10,500 |
| 18 months | 4.75% | $724 | $10,724 |
| 24 months | 4.50% | $920 | $10,920 |
Longer terms earn more total interest but lock money longer.
Frequently Asked Questions
What is a Certificate of Deposit (CD)?
A CD is a time-locked savings product where you deposit money for a fixed period (term) at a guaranteed interest rate. In exchange for not touching your money, banks pay higher rates than savings accounts. At maturity (term end), you receive your principal plus earned interest.
Why do CDs pay more than savings accounts?
Banks can reliably lend out your money when they know you won't withdraw for a set period. This certainty lets them pay you more. The longer the term, typically the higher the rate—though yield curves sometimes invert when short-term rates exceed long-term rates.
What happens if I withdraw early?
Early withdrawal triggers a penalty, usually several months of interest. A 12-month CD might have a 3-month interest penalty. Some CDs forfeit more interest than you've earned, creating a loss. Always check the early withdrawal penalty before opening a CD.
What is a CD ladder and should I use one?
A CD ladder involves opening CDs with staggered maturity dates. Example: Put $10,000 across 5 CDs maturing in 1, 2, 3, 4, and 5 years. Each year, one CD matures—reinvest at 5 years. This provides regular access to funds while earning longer-term rates.
Are CDs FDIC insured?
Yes, CDs at FDIC-insured banks are protected up to $250,000 per depositor, per institution. Credit union CDs (sometimes called share certificates) are NCUA insured for the same amount. Your principal and interest are fully protected even if the bank fails.
How do CD rates compare to Treasury bonds?
CDs and Treasury bonds both offer fixed returns. Treasuries are state/local tax-exempt but federally taxed. CDs are fully taxable. Treasuries are more liquid (tradeable). CDs may offer slightly higher rates due to their illiquidity. Compare after-tax returns for your situation.
Should I choose a brokered CD or bank CD?
Bank CDs come directly from banks; you manage through the bank. Brokered CDs are sold through brokerages, offering access to many banks' rates. Brokered CDs may be tradeable before maturity (though at market price). Bank CDs are simpler; brokered CDs offer more options.
When are CDs a good investment choice?
CDs work best for: (1) Short-term goals (1-5 years) where you can't risk stock volatility, (2) Money you don't need liquid access to, (3) When savings rates are high (like now in 2024), (4) Risk-averse investors seeking guaranteed returns. For long-term investing, stocks historically outperform CDs.
Key Points to Remember
- Guaranteed returns: Rate is locked—won't drop even if market rates fall
- Early withdrawal penalty: Understand the penalty before committing
- Compare APY, not rate: APY includes compounding for accurate comparison
- Consider CD ladders: Balance access with higher long-term rates
- FDIC insured: Your money is protected up to $250,000