Finance

CD Calculator

Calculate how much interest you'll earn on a certificate of deposit. Enter your deposit amount, APY, term length, and compounding frequency.

Quick Answer

A $10,000 CD at 4.75% APR for 12 months with daily compounding earns about $487 in interest, giving you a final balance of $10,487. The APY works out to roughly 4.87%.

CD Details

$
%
Total Interest Earned
$486.43
APY: 4.86%
Initial Deposit
$10,000.00
Interest Earned
$486.43
Final Balance
$10,486.43
Disclaimer: This calculator provides estimates for informational purposes only and should not be considered financial advice. Consult a qualified financial advisor for personalized guidance.

About This Tool

The CD Calculator helps you figure out exactly how much interest a certificate of deposit will earn over its term. Plug in your deposit amount, the bank's stated APR, the term length in months, and how often interest compounds. The tool instantly shows your total interest earned, final balance, and effective APY.

How CD Interest Is Calculated

CDs use compound interest, meaning you earn interest on your original deposit plus any previously accrued interest. The formula is A = P(1 + r/n)^(nt), where P is your principal, r is the annual rate, n is the number of compounding periods per year, and t is the time in years. More frequent compounding means slightly higher returns because interest is added to your balance more often.

Understanding APR vs. APY

Banks advertise both APR and APY, and the difference matters. APR is the simple annual rate before compounding. APY (Annual Percentage Yield) reflects the actual rate you earn after compounding. A CD with 5.00% APR compounded daily has an APY of about 5.13%. When comparing CD offers, always compare APY since it gives the true apples-to-apples return. Federal regulations require banks to disclose APY.

CD Laddering Strategy

Rather than locking all your money in one long-term CD, a laddering strategy spreads deposits across multiple CDs with staggered maturity dates. For example, you might split $50,000 into five $10,000 CDs maturing at 1, 2, 3, 4, and 5 years. As each CD matures, you reinvest in a new 5-year CD. This gives you regular access to some of your money while still capturing higher long-term rates.

When CDs Make Sense

CDs are ideal for money you won't need for a specific period and want to earn a guaranteed return. They're FDIC-insured up to $250,000 per depositor, making them one of the safest places to park cash. They work well for short-term savings goals like a down payment in 2 years, or as the conservative portion of a diversified portfolio. When interest rates are high, locking in a multi-year CD rate can be especially attractive.

Frequently Asked Questions

What is a certificate of deposit (CD)?
A CD is a savings product offered by banks and credit unions that pays a fixed interest rate for a specific term. You deposit a lump sum and agree not to withdraw it until the term ends (typically 3 months to 5 years). In exchange, you receive a higher interest rate than a regular savings account. Early withdrawal usually incurs a penalty.
How does compounding frequency affect CD earnings?
More frequent compounding means you earn interest on previously earned interest sooner, resulting in a slightly higher effective yield. Daily compounding earns more than monthly, which earns more than quarterly. For example, a $10,000 CD at 5% for 1 year earns $512.67 with daily compounding versus $511.62 with monthly — a small but real difference that grows with larger deposits and longer terms.
What is the difference between APR and APY?
APR (Annual Percentage Rate) is the stated nominal interest rate. APY (Annual Percentage Yield) accounts for compounding and represents your actual annual earnings. A CD with 5.00% APR compounded daily has an APY of about 5.13%. Banks are required to disclose APY so you can compare products on equal footing.
What happens if I withdraw a CD early?
Most banks charge an early withdrawal penalty, typically ranging from 3 to 12 months of interest depending on the CD term. On a short-term CD (under 1 year), the penalty is usually 3 months of interest. For longer terms, it can be 6-12 months. Some banks offer no-penalty CDs with slightly lower rates. The penalty can eat into your principal if you withdraw very early.
Are CD earnings taxable?
Yes. Interest earned on CDs is taxed as ordinary income by the IRS, even if you don't withdraw the funds. Your bank will issue a 1099-INT form for any interest over $10. The interest is taxable in the year it is credited to your account, not when the CD matures. State and local taxes may also apply depending on where you live.

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