CD Calculator

A Certificate of Deposit (CD) is a savings product where you deposit money for a fixed term (3 months to 5+ years) at a guaranteed interest rate. In exchange for locking your money, banks offer higher rates than regular savings accounts. At maturity, you receive your principal plus all earned interest. For example, a $10,000 CD at 5% APY for 12 months earns approximately $500 in interest.

APY (Annual Percentage Yield) includes compound interest effects, while the stated interest rate doesn't. A CD with 5% interest compounding monthly actually yields 5.12% APY because earned interest earns additional interest. APY is the true measure of what you'll earn. When comparing CDs, always use APY since it accounts for different compounding frequencies and shows actual annual returns.

More frequent compounding means slightly higher returns. A $10,000 CD at 5% for 1 year earns: $500 with annual compounding, $509.45 with monthly compounding, and $512.67 with daily compounding. The difference grows with larger amounts and longer terms. A $100,000 CD over 5 years can earn $500+ more with daily vs annual compounding. Most banks compound daily or monthly.

Early withdrawal triggers a penalty, typically 3-6 months of interest for short-term CDs or 12+ months for longer terms. If you withdraw $10,000 from a 12-month CD after 6 months with a 3-month penalty, you'd lose about half your earned interest. Some banks even deduct from principal if interest hasn't accrued enough. No-penalty CDs exist but typically offer lower rates.

A CD ladder divides your deposit across multiple CDs with staggered maturity dates. Example: invest $10,000 as five $2,000 CDs maturing in 1, 2, 3, 4, and 5 years. Each year when one matures, reinvest it at a 5-year rate. Benefits: regular access to funds without penalties, protection against rate changes, and eventually all money earns long-term rates. It balances liquidity with higher yields.