CD Calculator

With the default inputs, a $10,000 CD paying 5% compounded annually is worth $11,576.25 after three years, of which $1,576.25 is interest. The schedules below the result show how the interest builds each month and each year; the monthly figures use the monthly rate that produces the same yearly growth.

What is a Certificate of Deposit?

A certificate of deposit is a savings product offered by banks and credit unions (where it is often called a share certificate). You deposit a lump sum for a fixed term, from a few months to five years or more, and the institution pays a fixed interest rate for the whole term. At maturity you get back the deposit plus the interest. In return for that guaranteed rate, you agree to leave the money alone: taking it out early usually costs a penalty.

CDs generally pay more than regular savings accounts because the bank can count on keeping the money for a known period and lend it out accordingly. Longer terms have historically paid more than shorter ones, although when the yield curve is flat or inverted, as it was during 2023, short-term CDs can pay as much as or more than long-term ones.

CDs suit money that has a known purpose and date, such as a home down payment in two years, a tuition payment or a planned purchase, and the cash portion of a conservative portfolio. They protect principal and lock in a rate, but they are not designed to beat inflation by a wide margin over long periods.

FDIC-Backed

CDs at banks insured by the Federal Deposit Insurance Corporation (FDIC) are covered up to $250,000 per depositor, per insured bank, per ownership category, including principal and accrued interest. Credit union certificates have the same coverage through the National Credit Union Administration (NCUA). The guarantee is backed by the full faith and credit of the US government, and no depositor has lost a penny of insured funds since the FDIC was created in 1933. Spreading larger balances across banks or ownership categories, such as individual, joint and retirement accounts, extends the coverage.

Where and How to Purchase CDs

Most banks and credit unions sell CDs directly, either at a branch or online. Online banks often pay noticeably more than large branch-based banks because their costs are lower. Rates change frequently, so compare offers from several institutions and check the minimum deposit, the early withdrawal penalty and whether the rate is quoted as an APY.

Brokered CDs are sold through brokerage firms. They are issued by banks, carry FDIC insurance and let you buy CDs from many banks in one account. Unlike bank CDs, they can usually be sold before maturity on a secondary market instead of paying a penalty, but the sale price depends on current rates and may be less than you paid. Some brokered CDs are callable, meaning the issuing bank can redeem them early if rates fall.

History of CDs

Banks have issued time deposits for centuries, but the modern retail CD took shape in the US in the twentieth century. For decades, Regulation Q capped the interest banks could pay on deposits, which kept CD rates modest. In 1961, First National City Bank of New York (later Citibank) introduced large negotiable CDs that could be traded, a major innovation in bank funding.

As inflation soared in the late 1970s and early 1980s, savers moved money into money market funds that were not subject to the caps, and Congress phased out Regulation Q's limits between 1980 and 1986. CD rates followed market rates up: one-year CDs paid well above 10% in the early 1980s. Rates then trended down for decades and fell to near zero after the 2008 financial crisis and again in 2020. When the Federal Reserve raised rates rapidly in 2022 and 2023, CD yields climbed back above 5% at many banks, their highest in more than fifteen years, before easing as the Fed began cutting rates in late 2024.

How to Use CDs

Match the term to when you will need the money, so you never pay an early withdrawal penalty. If you expect rates to rise, shorter terms or a ladder keep you flexible; if you expect rates to fall, a longer term locks in today's yield.

CDs work well as the safe part of a broader plan: an emergency fund beyond the first few months of expenses, savings for a goal a year or more away, or a predictable income source for retirees. Interest can usually be paid out monthly or quarterly, or left to compound. Interest is taxable each year as ordinary income even if it is not paid out, unless the CD is held in an IRA, which is why this calculator lets you enter a tax rate. Keep inflation in mind as well: if inflation runs at 3% and a CD pays 4% before a 22% tax, the real after-tax return is close to zero.

Withdrawing from a CD

Taking money out before maturity usually costs a penalty set by the bank, commonly a number of months of interest: around three months on terms under a year, six to twelve months on longer terms, sometimes more. If you have not earned that much interest yet, the penalty can reduce your principal. Banks may waive the penalty after the owner's death or a court-declared incompetence. Read the terms before you buy.

CD Ladder

A CD ladder spreads money across CDs with staggered maturities so that part of the money comes due regularly. For example, $50,000 could be split into five $10,000 CDs maturing in one, two, three, four and five years. Each year, as one CD matures, you can spend the money or reinvest it in a new five-year CD at the top of the ladder. After the first cycle, every rung earns the higher long-term rate, yet a CD matures every year.

Ladders reduce the risk of locking all your money in at a low rate just before rates rise, and they provide regular access to cash without penalties. Ladders can be built with shorter rungs too, such as three-, six-, nine- and twelve-month CDs.

APY vs. APR

The annual percentage rate (APR) is the stated yearly rate before compounding. The annual percentage yield (APY) includes compounding and shows what you actually earn in a year. Under the Truth in Savings Act, banks must disclose the APY on deposit accounts, so it is the number to use when comparing CDs. A 5% APR compounded monthly is a 5.116% APY. In the calculator, choose annual compounding to enter an APY directly, or monthly to enter an APR on a monthly-compounding CD.

Compounding Frequency

The more often interest compounds, the faster the balance grows, because interest starts earning interest sooner. The effect is small at typical CD rates: at 5% for three years, daily compounding beats annual compounding by only about $42 on a $10,000 deposit.

A = P(1 + r/n)ⁿᵗ

A

balance at maturity

P

initial deposit

r

annual interest rate

n

compounding periods per year

t

term in years

With continuous compounding, A = P·eʳᵗ. The monthly schedule spreads each year's interest evenly over its months using the equivalent monthly rate.

Types of CDs

Beyond the traditional fixed-rate CD, banks and brokers offer several variations.

• No-penalty (liquid) CD: lets you withdraw the full balance after a short waiting period without a penalty, in exchange for a lower rate.
• Bump-up or step-up CD: a bump-up CD lets you request a higher rate once or twice if the bank's rates rise; a step-up CD raises the rate on a preset schedule.
• Jumbo CD: requires a large minimum deposit, often $100,000, sometimes for a slightly higher rate.
• Add-on CD: allows additional deposits after opening.
• IRA CD: a CD held inside an individual retirement account, so interest grows tax-deferred or, in a Roth IRA, tax-free.
• Brokered CD: bought through a brokerage and tradable before maturity on a secondary market.
• Callable CD: pays a higher rate but lets the issuer redeem it early, typically when rates fall.
• Variable-rate CD: the rate is tied to an index and can move during the term.
• Zero-coupon CD: sold at a discount and pays no interest until maturity, though interest is still taxable each year.

Alternatives to CDs

Several other low-risk options compete with CDs for short- and medium-term savings.

• High-yield savings accounts: FDIC-insured and fully liquid, with rates that often come close to short-term CD rates but can change at any time.
• Money market accounts: bank accounts with check-writing or debit access and variable rates, also FDIC-insured.
• Money market funds: mutual funds that hold very short-term government and corporate debt. They are not FDIC-insured but are designed to keep a stable $1 share price, and yields track short-term rates.
• Treasury bills, notes and bonds: backed by the US government and exempt from state and local income tax, which can give them an edge over CDs in high-tax states. They can be bought at TreasuryDirect or through a broker and sold before maturity.
• Series I savings bonds: pay a rate that adjusts with inflation, with a $10,000 annual purchase limit and a minimum one-year holding period.
• Bond funds: offer higher potential returns and daily liquidity, but their value moves with interest rates, so principal is not guaranteed.
• Fixed annuities: insurance contracts that pay a guaranteed rate for a term, with tax deferral, but with surrender charges and protection from state guaranty associations rather than the FDIC.

Frequently asked questions

Sources

• FDIC – Deposit Insurance
• NCUA – Share Insurance
• Consumer Financial Protection Bureau