Certificate of Deposit (CD) Calculator

What Is a Certificate of Deposit (CD)?

A Certificate of Deposit (CD) is a savings product offered by banks and credit unions that pays a fixed interest rate over a set period of time called the “term.” In exchange for locking up your money, you receive a guaranteed, predictable return, and normally a better one than a regular savings account pays.

The CD Formula

CD growth uses the compound interest formula:

A = P × (1 + r/n)^(n×t)

Where:

• A = Final balance (principal + interest)
• P = Principal (initial deposit)
• r = Annual interest rate as a decimal (e.g., 5% = 0.05)
• n = Number of compounding periods per year
• t = Term in years
• Interest Earned = A − P

APY vs. APR

The Annual Percentage Yield (APY) accounts for compounding and is the true annual return:

APY = (1 + r/n)^n − 1

For example, a 5% nominal rate compounded monthly yields an APY of about 5.116%. The extra tenth of a percent is the interest earned in month one earning its own interest in month two.

APY or nominal? Get this right first

Banks advertise CDs in APY, and APY already contains the compounding. If a CD is advertised at 5.00% APY, then $10,000 becomes exactly $10,500 after a year, whatever the compounding schedule says. The schedule only changes how the interest is posted along the way.

A 5.00% nominal rate compounded monthly is a different, slightly better product: it works out to a 5.116% APY, and $10,000 becomes $10,511.62. That is a $11.62 difference on a small deposit and a real one on a large deposit over five years.

So use the selector on the form to say which number you are holding. Entering an advertised APY and having it treated as nominal is the single easiest way to overstate what a CD will pay.

Worked Example

Deposit $10,000 into a 12-month CD advertised at 5.00% APY:

• A = $10,000 × 1.05 = $10,500.00
• Interest earned = $500.00

The same deposit at a 5.00% nominal rate compounded monthly:

• A = $10,000 × (1 + 0.05/12)^12 = $10,511.62
• Interest earned = $511.62, an APY of 5.116%

CD Laddering Strategy

A CD ladder splits your savings across multiple CDs with staggered maturity dates (e.g., 3-month, 6-month, 12-month, 18-month, 24-month). This gives you access to funds regularly without sacrificing much yield. As each CD matures, you reinvest it into the longest rung.

Typical Rates and Terms

CD terms range from 1 month to 5+ years. In a normal rate environment, longer terms pay higher rates. A 1-year CD might yield 4.5–5.5% while a 5-year CD might yield 4.0–5.0% (yield curve can invert). Online banks often pay significantly more than traditional banks.

Early Withdrawal Penalty

Withdrawing before the maturity date triggers a penalty, commonly 60 to 150 days of interest depending on the term. On a short CD in its first few months that penalty can exceed everything the CD has earned, which means you get back less than you put in. The calculator above works out what yours would cost.