How the CD calculator works
A certificate of deposit (CD) is a bank deposit that pays a fixed rate for a fixed term, such as 6 months or 5 years. You agree to leave the money alone until the CD matures. In return, the bank usually pays more than a regular savings account, and the rate cannot fall during the term.
Banks show two numbers for a CD. The interest rate (sometimes called the APR) is the yearly rate before compounding. The APY (annual percentage yield) is what you actually earn in a year once interest earns interest. The calculator accepts either one. Tell it which you entered and how often the bank compounds, and it works out the other.
Value at maturity = P × (1 + r ÷ n)^(n × t) = P × (1 + APY)^t
P = deposit, r = interest rate, n = compounding periods a year, t = term in years
Because APY already includes compounding, the maturity value from the APY is the same whatever the compounding. That is why US banks must show the APY under the Truth in Savings Act (Regulation DD). It lets you compare CDs side by side.
Worked example 1: a 12-month CD
You put $10,000 in a 12-month CD paying 4.00% APY, compounded daily.
- Value at maturity: $10,000 × 1.04 = $10,400
- Interest earned: $400
- The interest rate behind that APY, compounded daily, is about 3.922%.
If you pay 24% tax on the interest, you keep about $304. Leave the CD for 18 months at the same APY and it grows to about $10,605.96, because $10,000 × 1.04^1.5 = $10,605.96.
Worked example 2: rate vs APY
Another bank quotes a 4.50% interest rate compounded monthly on a 12-month CD. Switch the calculator to “Interest rate” and enter 4.5.
- APY: (1 + 0.045 ÷ 12)^12 − 1 = 4.594%
- Value at maturity on $10,000: $10,459.40
So 4.50% compounded monthly beats 4.50% APY by about $9.40 a year on $10,000. Compounding changes the result less than people expect:
| Compounding at a 4.50% rate | APY | $10,000 after 1 year |
|---|---|---|
| Annually | 4.500% | $10,450.00 |
| Semiannually | 4.551% | $10,455.06 |
| Quarterly | 4.577% | $10,457.65 |
| Monthly | 4.594% | $10,459.40 |
| Daily | 4.602% | $10,460.25 |
| Continuously | 4.603% | $10,460.28 |
Worked example 3: cashing out early
Most CDs charge a penalty if you take the money out before maturity. A common rule is a number of months of interest. Banks usually work it out as simple interest on the amount withdrawn:
Take the $10,000 12-month CD at 4.00% APY, and say you need the money after 6 months. The penalty is 3 months of interest.
- Balance after 6 months: about $10,198.04
- Penalty: $10,000 × 3.922% × 3 ÷ 12 = about $98.06
- You receive about $10,099.98. That is a gain of about $100, or about 2.0% a year instead of 4%.
Penalties are often much bigger on long CDs. On a 5-year CD with a 12-month interest penalty, cashing out after 6 months returns only about $9,805.81. The penalty is bigger than the interest earned so far, so about $194 comes out of your deposit. Turn on “Estimate cashing out early” under More options to test your own CD.
Federal rules set only a minimum. Under Regulation D, money withdrawn within the first six days after a deposit must carry a penalty of at least seven days’ simple interest. Anything beyond that is up to the bank, so read your CD agreement before you open the account.
Average CD rates by term
The FDIC publishes national average rates every month. These averages include many big banks that pay little. Online banks and credit unions often pay several times more, so shop around.
| CD term | FDIC national average (as of 19 Oct 2026) |
|---|---|
| 3 months | 1.14% |
| 6 months | 1.39% |
| 12 months | 1.76% |
| 24 months | 1.55% |
| 36 months | 1.39% |
| 60 months | 1.41% |
On $25,000 for 5 years, the difference between 1.41% APY (about $26,812) and 4.1% APY (about $30,563) is roughly $3,750 of extra interest.
Are CDs safe?
CDs at an FDIC-insured bank are insured up to $250,000 per depositor, per bank, for each account ownership category. Share certificates at a federally insured credit union have the same cover from the NCUA. The SEC’s Investor.gov warns that brokered CDs, sold through brokerage firms, can work differently. Some can be “called” (ended early) by the bank, and selling one before maturity can mean a loss if rates have risen. Check the terms in writing.
The main risk with a bank CD is not losing money but losing buying power. If inflation runs above your CD rate, your money buys less at maturity than it did when you opened the CD.
Tips for choosing a CD
- Compare APYs, not rates. The APY already includes compounding.
- Match the term to when you need the money. Money for a goal in 18 months fits an 18-month CD. Keep your emergency fund in an easy-access savings account instead.
- Build a CD ladder. Split $20,000 into four $5,000 CDs of 1, 2, 3 and 4 years. Each year one matures, and you can reinvest it in a new 4-year CD or spend it.
- Look at the penalty before the rate. A slightly higher rate is not worth it if you might need the money and the penalty is a full year of interest.
- Plan for tax. CD interest is taxed as ordinary income. It is usually taxable in the year it is credited and available to you, even if it stays in the CD.
Related calculators
Use the interest calculator to compare simple and compound interest, the compound interest calculator for long-term growth with regular deposits, and the inflation calculator to see whether your CD rate beats rising prices.
This calculator is for planning. Your bank’s disclosures decide the exact interest, compounding dates and penalties.