CD Calculator (CD Rate & Interest Calculator)

What is a CD and how does CD interest work?

A certificate of deposit (CD) is a savings product where you lock money with a bank or credit union for a set term, such as 6 months, 1 year or 5 years, in exchange for a fixed rate. Because the rate is fixed, a CD calculator can tell you exactly what you will have at the end.

Interest on most CDs compounds, which means each period's interest is added to the balance and earns interest itself. The more often it compounds, the slightly higher your effective return.

APY vs nominal rate: what is the difference?

The nominal rate (often just called the interest rate) is the stated yearly rate before compounding is counted. The APY (annual percentage yield) is the real yearly return after compounding is included. Banks advertise APY because it lets you compare CDs fairly.

For example, a 4.40% nominal rate compounded daily gives an APY of about 4.50%. This calculator lets you enter either one. If you have the APY, you do not need to choose a compounding frequency.

How to calculate CD interest by hand

1. Convert the term to years (months ÷ 12).
2. If you have an APY, use A = P × (1 + APY)^t. If you have a nominal rate, use A = P × (1 + r/n)^n×t.
3. Subtract the deposit from A to get the interest earned.

For a 6-month CD, t = 0.5, so $10,000 at 4.5% APY grows to 10,000 × 1.045^0.5, about $10,222.

What changes your CD return

• Term length: longer terms often, but not always, pay a higher rate.
• Compounding frequency: daily compounding earns slightly more than annual at the same nominal rate.
• Early withdrawal penalties: breaking a CD early can cost several months of interest. This calculator does not include that.
• Taxes: CD interest is generally taxed as ordinary income.
• Insurance: bank CDs are typically insured by the FDIC and credit union CDs by the NCUA, up to the legal limits per depositor, per institution and ownership category.

CD ladders and comparing options

A CD ladder splits your money across several CDs with different terms, such as 1, 2 and 3 years. As each CD matures you can spend the cash or reinvest it, which gives you regular access to funds and reduces the risk of locking everything in at one rate. To compare options, run each CD through the calculator and look at the ending balance and effective APY rather than only the headline rate.

Tips for using the CD calculator

• Match the rate type to what the bank shows. Most advertise APY, so leave APY selected. A disclosure that lists an interest rate and a compounding schedule calls for the nominal option.
• Use months for short CDs. A 6-month or 9-month CD is entered as 0 years and 6 or 9 months.
• Test a few scenarios. Change the term or deposit and compare ending balances to see whether a longer lock-up is worth it.
• Read the chart. The balance curve bends upward over time because interest earns interest, and the effect grows with longer terms and higher rates.

Simple interest vs compound interest on a CD

Some CDs pay simple interest, which is calculated on the original deposit only, or pay interest out to you monthly instead of adding it to the balance. If your CD pays interest out, you will not get the compounding shown here, and your balance will stay at the deposit while the interest goes to a checking or savings account. Ask the bank whether interest is added to the CD or paid out, and whether the stated APY assumes it stays in the CD.

When interest compounds and stays in the CD, the formula on this page applies exactly.

What happens at maturity?

When a CD matures there is usually a short grace period, often 7 to 10 days, to withdraw the money or move it. Many banks automatically renew the CD for a similar term at whatever rate is current, which could be lower than your original rate. Put the maturity date in your calendar and decide ahead of time whether to renew, switch banks or build a ladder.