CD Calculator

What a CD actually pays, and why APY is the only number you need

A certificate of deposit is a deal: you promise not to touch the money for a fixed term, and the bank promises a fixed rate. Because the Truth in Savings Act requires deposit products to be advertised in APY — annual percentage yield — the rate you see already includes whatever compounding schedule the bank uses internally. That is why this calculator has no "compounded monthly / daily" dropdown. Applying monthly compounding on top of an APY would double-count it and overstate your return.

The formula is therefore short: maturity value = deposit × (1 + APY)^(months ÷ 12). The exponent handles part-years cleanly, so an 18-month term is simply the rate raised to 1.5.

Worked example: 0,000 at 4.50% APY for 12 months

10,000 × 1.045^1 = 0,450.00 at maturity. Interest earned is $450.00, which works out to $37.50 a month of effective interest. That monthly line is the useful one for comparison shopping, because it puts a 6-month CD and a 5-year CD on the same footing before you think about reinvestment risk.

Worked example: the same money for 5 years

10,000 × 1.045^5 = 2,461.82, so $2,461.82 of interest, or $41.03 a month. The monthly figure beats the one-year CD by $3.53 not because the rate is different but because compounding has more room to work. Locking up money for five years at 4.5% is a bet that rates will not be meaningfully higher a year from now — that is the real question a CD asks, and no calculator can answer it for you.

Worked example: what the early-withdrawal penalty costs

Penalties are quoted in months of interest, calculated at the CD's rate on the amount withdrawn, not on what you have actually accrued. On 0,000 at 4.50%, a six-month penalty is 10,000 × 0.045 × (6 ÷ 12) = $225. Your accrued interest only reaches $225 at month 7 — before that, the penalty comes out of your principal and you withdraw less than you deposited. That is legal in the United States and it surprises people every year.

The breakeven line in the result goes one step further and compares against leaving the money in a high-yield savings account at a flat 4%. On the 12-month CD above there is no month where an early exit beats the savings account: the $225 penalty is simply larger than the 0.5-point rate advantage can produce in a year. On the 5-year version the CD pulls ahead at month 48 — cash out before then and the savings account would have been the better home for the money. Both figures assume the savings rate holds at 4% the whole time, which it will not; treat them as an illustration of the shape, not a forecast.

Building a CD ladder

A ladder is the standard fix for the lock-up problem. Split $25,000 into five $5,000 rungs at 1, 2, 3, 4 and 5 years. At 4.5% those rungs mature at $5,225.00, $5,460.12, $5,705.83, $5,962.59 and $6,230.91. Each year one rung comes due: spend it if you need cash, or roll it into a new 5-year CD. After four years every rung is a 5-year CD — the highest-paying tenor on most rate sheets — yet you still have one maturing every twelve months.

The ladder trades a small amount of yield for two real things: penalty-free annual access, and averaging across the rate cycle so you are never fully committed at the bottom. A variant, the barbell, puts money only at the short and long ends and skips the middle; it makes sense when you have a specific view on where rates go, and the plain ladder makes sense when you do not.

CD or high-yield savings?

Compare the CD's APY against the savings rate you can actually get today, then ask three questions. How likely is it you need this money before maturity — if the answer is anything above "very unlikely", the penalty maths above usually wins the argument for savings. How far above the savings rate is the CD; under about half a point, the lock-up rarely pays. And where are rates heading; savings rates move within weeks of a central bank decision, while your CD rate is frozen until maturity, which is exactly what you want when rates fall and exactly what you do not want when they rise.

Limits of this calculator

It models one deposit at one fixed rate with no additions and no withdrawals, which is how nearly all CDs work. It does not deduct tax — CD interest is ordinary income and is taxable in the year it is credited, even inside a multi-year term. It does not model bump-up, step-up, no-penalty or callable CDs, and it assumes the balance stays inside deposit insurance limits. Most importantly, it says nothing about renewal: many CDs roll over automatically at whatever rate the bank happens to be offering that week, which is often well below the rate you originally signed up for. Diarise your maturity date.