CD Interest Calculator

How it works

A certificate of deposit (CD) is a simple trade. You leave a lump sum with a bank for a fixed term, and the bank pays a fixed interest rate the whole time. Because that rate is locked, the math holds none of the guesswork a savings account brings.

Banks advertise CDs by annual percentage yield (APY). That APY already folds compound interest in, so the balance at maturity comes from one clean formula:

• B. Your balance at maturity.
• P. Your opening deposit.
• APY. The advertised annual percentage yield, written as a decimal.
• t. The term in years, which is months divided by 12.

The formula assumes interest stays inside the CD and compounds until the term ends. Most deposit accounts of this kind work that way by default.

You can instead ask the bank to pay the interest out to a checking account each month. Then the balance stays flat and you collect less in total.

With the defaults above, $10,000 at 4% APY for 36 months grows to about $11,249. That is $1,249 of interest on top of the money you put in.

The chart plots that growth month by month. It uses the monthly rate equivalent to your APY, so the curve lands on the same maturity value to the dollar. More than a third of that $1,249 arrives in the final twelve months, because by then the earlier interest is earning interest of its own.

✓ Every result is checked against independent reference math. See how we test the calculators →

How to use this calculator

1. Enter your opening deposit, meaning the amount you can leave untouched for the whole term.
2. Type in the APY the bank quotes rather than the nominal rate, since the calculator treats it as an annual yield.
3. Set the term in months to match the CD you are actually shopping for, such as 12, 36 or 60.
4. Read the balance at maturity and the total interest, then use the month by month chart to see where you stand part way through.
5. Change one input at a time. Try the same deposit at two rates half a percentage point apart to see what shopping around is worth.

A worked example: $10,000 in a 3-year CD at 4% APY

Say you have $10,000 sitting in checking and an online bank is offering a 3-year CD at 4% APY. Lock it in and the balance at maturity comes to $11,249: your deposit back plus $1,249 of interest, earned for doing nothing but leaving the money alone for 36 months.

Now compare that to the branch bank down the street quoting 3% on the same term. The same $10,000 grows to only $10,927, which is $927 of interest. The one-point difference in APY is worth $321 over the term, the price of not shopping around for an afternoon.

Term length pulls the same lever. Keep the 4% APY but shorten the CD to 12 months and the interest drops to $400, with the balance landing at $10,400. Swap in your own deposit, rate, and term above to see what the trade between yield and lock-up really pays you.

Getting a better rate on the same deposit

Rates vary far more between financial institutions than most people expect. The branch bank that already holds your checking account usually pays the least, while online banks and credit unions compete hard on headline APY. At these defaults, one extra percentage point of yield is worth a few hundred dollars over the term.

• Shop the term, not just the rate. Promotional CDs with odd terms of 7, 11 or 13 months often pay more than the standard 12-month product at the same bank.
• Check the minimum deposit. Some of the best rates need $500 or $1,000 to open, and jumbo tiers above that rarely pay enough extra to matter.
• Split the money across CDs maturing in one, two and three years. Banks call that a CD ladder. One matures every year, so you can reinvest at whatever rates exist then instead of betting everything on today's.
• Compare a brokered CD with a bank CD. Brokerages sell CDs from many banks in one place, but those CDs trade like bonds, so selling before maturity means taking the market price.

Compare offers on yield rather than on the quoted rate. Converting an APR into an APY shows how much the compounding is worth before you commit.

What happens if you cash out a CD early?

The fixed rate is the reward for locking the money up. The early withdrawal penalty is how the bank enforces that deal.

Break a CD before maturity and the bank claws back a slice of interest. Expect a few months' worth on short terms, and often six to twelve months' worth on longer ones. Leave early enough and the penalty can exceed everything you have earned, so you get back less than you deposited.

Most banks accrue interest daily and credit it monthly, so a penalty quoted in months has a dollar figure you can work out before you sign.

There are two ways to avoid the problem. Match the term to the date you will actually need the money, and pick the shorter term when you are unsure, because a little less interest beats a penalty.

The other option is a no-penalty CD. That kind pays a lower APY in exchange for letting you withdraw after the first week or so.

CD or high-yield savings account?

The honest comparison is not a CD against nothing. It is a CD against a high-yield savings account or a money market account, and the difference is who carries the rate risk.

Savings accounts float, so the bank can cut the rate any month it likes. Most banks do exactly that once the Federal Reserve lowers the federal funds rate.

A CD moves that risk onto the bank, because your APY is contractual until maturity. When rates look likely to fall, locking one in protects interest you would otherwise lose, and the longer the term the more you protect. When rates are rising, savings accounts and very short CDs keep you free to take the better offers coming.

Two things push the other way. Money you might need on short notice, such as an emergency fund, belongs in savings regardless of the yield.

A standard CD also takes one deposit at opening, so it cannot hold a monthly saving habit. Check the yield against inflation too, since what you keep is the effective annual rate above rising prices.

How a CD compares with bonds and the stock market

A CD is the low-risk end of a range of investments, and the modest yield is the price of that. You know the rate of return the day you open it, while money in the stock market or in mutual funds can fall in any given year.

• Treasury securities. Backed by the U.S. government, exempt from state income tax, and sellable before maturity at whatever price the market gives that day.
• Bonds. A corporate bond pays more because the issuer can default. Zero-coupon bonds pay nothing until the end, much like a CD that compounds.
• Mortgage securities. Pools issued by the Government National Mortgage Association (Ginnie Mae) pass homeowner payments through to investors. Those payments arrive unevenly as people refinance.
• Peer-to-peer lending. You fund consumer loans directly for a higher advertised rate, with no deposit insurance and real losses when borrowers stop paying.

None of those carry the guarantee a CD does. That guarantee is the whole reason a CD pays less than any of them.

Is the money in a CD actually insured?

A CD at an FDIC-insured bank is covered up to $250,000 per depositor, per institution, per ownership category. The National Credit Union Administration (NCUA) gives credit unions the same coverage. That insurance is why a CD is treated as a savings product rather than an investment.

The limit counts all your deposit accounts at one institution together, so a CD, a checking balance and a savings balance share the same ceiling. Spreading a large sum of money across financial institutions keeps all of it protected.

During the 2008 financial crisis, insured depositors were paid in full even at banks that failed. Most of those failures were handled over a weekend, with accounts left intact.

The CFPB's Ask CFPB pages explain how the ownership categories work if you hold accounts jointly or in trust.

Why do banks pay interest on a CD?

A bank does not park your deposit in a vault. It lends the money out. A mortgage or a home equity loan somewhere is funded by deposits like yours, so the interest those borrowers pay is where your yield comes from.

That is why deposit rates and loan rates move together. The annual percentage rate a borrower pays on a home equity line of credit (HELOC) sits well above the APY on any CD, and that gap is the bank's income.

It also explains why longer terms usually pay more. A bank can match a three-year deposit against longer, higher-rate lending such as mortgages and home equity loans, so it pays up for the commitment.

The same logic applies to your own borrowing. If you carry a credit card balance, the APR on that debt is far higher than any CD rate, so clearing it returns more than the deposit ever will.