CD Calculator

Enter the deposit, the rate your bank offers and the term. Pick the compounding the bank uses (daily or monthly for most US banks; monthly is close enough here) or simple interest for a CD that pays interest out instead of adding it to the balance.

How to use the CD calculator

1. Deposit amount: what you put into the CD on the day it opens. Most banks have a minimum, often $500 or $1,000, and jumbo CDs start at $100,000.
2. Interest rate: the annual rate from the bank’s rate sheet. If the bank quotes only an APY, see the note on APY below.
3. Term: from three months to ten years, in steps of a quarter year. A 6-month CD is 0.5, an 18-month CD is 1.5.
4. Compounding: how often interest is added to the balance. Choose monthly for most banks and credit unions, quarterly or yearly if the account terms say so, and simple interest if the interest is paid out to another account.

The result shows the maturity value, the amount you deposited, the interest earned and the effective annual yield.

How CD interest is calculated

For a CD that compounds, the bank adds interest to the balance at the end of each period, and the next period’s interest is calculated on the larger balance:

Maturity value = P × (1 + r ÷ k)^(k × t)

P is the deposit, r the annual rate as a decimal, k the number of compounding periods a year and t the term in years.

Take the defaults: $10,000 at 4.5% for 5 years.

Compounding	Maturity value	Interest earned	Effective yield
Yearly	$12,462	$2,462	4.50%
Monthly	$12,518	$2,518	4.59%
Simple interest (paid out)	$12,250	$2,250	4.14%

Monthly compounding earns about $56 more than yearly compounding on this deposit over five years. Simple interest earns less because the interest leaves the CD every month and stops earning anything. If you move that payout into a savings account, you get some of the difference back.

For simple interest, the “effective yield” is lower than the rate because it measures how fast the CD balance itself grows. You still receive 4.5% a year in payouts.

Rate versus APY

US banks must show the annual percentage yield (APY) under the Truth in Savings Act. APY already includes compounding, so a 4.5% rate compounded monthly is a 4.59% APY. When you compare CDs from different banks, compare APY with APY.

If the bank quotes only an APY and you want the rate to enter here, you can still use the APY: choose yearly compounding and enter the APY as the rate. The maturity value will be the same, because APY is defined as what one year of compounding produces.

On a one-year CD, the effective yield shown here equals the APY. On $10,000 at 4.5% compounded monthly, one year earns about $459.

Choosing a term

Longer terms usually pay more, but not always. When the market expects rates to fall, banks sometimes pay more on 6- and 12-month CDs than on 5-year ones. Before choosing a term, think about:

• When you will need the money. Early withdrawal penalties are commonly three to six months of interest on a one-year CD and up to a year or more on long CDs. On a short CD, the penalty can eat into the principal.
• What happens at maturity. Most CDs renew automatically for the same term at whatever rate the bank is paying then, which may be lower. There is usually a grace period of 7 to 10 days to withdraw or move the money.
• Laddering. Splitting the money across CDs that mature at different times, for example one, two, three, four and five years, gives you access to part of it every year and averages out rate changes.

Run the calculator once for each term you are considering. The difference in interest is often smaller than people expect. On $10,000, going from a 4.0% one-year CD to a 4.5% one-year CD is worth about $50.

Comparing terms with real numbers

Here is $10,000 compounded monthly at a set of rates that is typical when short-term rates are higher than long-term ones. The rates are examples, not quotes.

Term	Rate	Interest earned	Maturity value
6 months	4.60%	$232	$10,232
1 year	4.50%	$459	$10,459
2 years	4.25%	$886	$10,886
3 years	4.00%	$1,273	$11,273
5 years	3.90%	$2,149	$12,149

The 5-year CD has the lowest rate but still earns the most in dollars, because the money is locked up longest. The real question is what you could earn when a shorter CD matures. If rates fall, the 5-year CD wins. If they rise or stay put, rolling over shorter CDs can come out ahead. Nobody knows which will happen, which is why many savers ladder.

Special types of CD

• Bump-up CDs let you raise the rate once or twice during the term if the bank’s rate goes up. They start at a lower rate.
• Add-on CDs accept more deposits after opening. For those, this calculator covers the first deposit, and each extra deposit can be run separately for the time it stays in.
• Callable CDs pay a higher rate but the bank can end them early, usually when rates fall. Check the call date before buying one.
• Step-up CDs have a rate schedule that rises on set dates. Run each step separately, carrying the balance forward.

Taxes on CD interest

CD interest is taxed as ordinary income in the year it is credited to your account, even if it stays in the CD until maturity. The bank sends Form 1099-INT for any year in which you earn $10 or more. A five-year CD that compounds therefore creates a tax bill every year, not one at the end.

Interest in an IRA CD is not taxed until withdrawal (traditional IRA) or at all (Roth IRA, if you follow the rules). The results shown here are before tax. To estimate after-tax interest, multiply the interest by one minus your marginal tax rate, including state tax. Treasury bills and notes are exempt from state and local tax, which can make them worth more than a CD with a slightly higher rate in high-tax states.

Safety

CDs at FDIC-insured banks and NCUA-insured credit unions are covered up to $250,000 per depositor, per institution, per ownership category. That limit includes the interest. If a CD plus its interest will go over $250,000, split it between banks or ownership categories. Brokered CDs bought through a brokerage account are also FDIC insured, but they can lose value if you sell them before maturity.

CD or something else?

A CD locks in a rate. A high-yield savings account pays a rate that can change at any time but lets you withdraw whenever you like. If you want to build savings by depositing a set amount every month instead of a lump sum, use the savings plan calculator. For money you will not need for a decade or more, compare the result with the monthly investment calculator at a few different return rates, keeping in mind that investment returns are not guaranteed.

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Learn more

How CD interest is calculated explains compounding and APY with a worked example. Deciding between locking money up and keeping it liquid? Read CD vs high-yield savings.

Frequently asked questions

How much interest will a $10,000 CD earn in a year?

At 4.5% compounded monthly, about $459. At 4.0% it is about $407, and at 5.0% about $512. The calculator shows the exact figure for any rate: set the term to 1 year and choose the compounding your bank uses.

Do CDs compound daily or monthly?

It depends on the bank. Many compound daily and credit monthly; some compound monthly or quarterly. The difference between daily and monthly compounding is tiny, usually a few cents a year on $10,000, so choosing monthly here gives a very close answer. The account disclosure states the method.

Can I lose money in a CD?

Not from the bank failing, as long as you stay within FDIC or NCUA limits. You can lose part of the interest, and sometimes some principal, if you withdraw early and pay the penalty. Brokered CDs sold before maturity can fetch less than you paid if rates have risen.

What happens when my CD matures?

The bank notifies you before maturity. If you do nothing, most CDs renew for the same term at the bank’s current rate. During the grace period, usually 7 to 10 days, you can withdraw the money, move it or pick a different term without a penalty.

Is a no-penalty CD worth it?

A no-penalty CD lets you withdraw the full balance after a short waiting period, usually a week, without losing interest. The rate is often a little lower than a regular CD of the same term. It suits money you will probably leave alone but might need, such as an emergency fund you want to earn a fixed rate.

Do I pay tax on CD interest before the CD matures?

Yes. Interest is taxable in the year it is credited, even if you cannot withdraw it without a penalty. A five-year CD produces a Form 1099-INT every year. CDs held inside an IRA are the exception, because the IRA rules decide when and whether the interest is taxed.