Certificate of Deposit (CD) Calculator

What Is a Certificate of Deposit (CD)?

A Certificate of Deposit (CD) is a savings product offered by banks and credit unions that pays a fixed interest rate over a set period of time called the “term.” In exchange for locking up your money, you receive a guaranteed, predictable return — typically higher than a regular savings account.

The CD Formula

CD growth uses the compound interest formula:

A = P × (1 + r/n)^(n×t)

Where:

• A = Final balance (principal + interest)
• P = Principal (initial deposit)
• r = Annual interest rate as a decimal (e.g., 5% = 0.05)
• n = Number of compounding periods per year
• t = Term in years
• Interest Earned = A − P

APY vs. APR

The Annual Percentage Yield (APY) accounts for compounding and is the true annual return:

APY = (1 + r/n)^n − 1

For example, a 5% nominal rate compounded monthly yields an APY of about 5.116% — slightly more than 5% because interest earned each month itself earns interest.

Worked Example

Suppose you deposit $10,000 into a 12-month CD at 5.0% APY, compounded monthly:

• r = 0.05, n = 12, t = 1
• A = $10,000 × (1 + 0.05/12)^12 = $10,511.62
• Interest earned = $511.62

CD Laddering Strategy

A CD ladder splits your savings across multiple CDs with staggered maturity dates (e.g., 3-month, 6-month, 12-month, 18-month, 24-month). This gives you access to funds regularly without sacrificing much yield. As each CD matures, you reinvest it into the longest rung.

Typical Rates and Terms

CD terms range from 1 month to 5+ years. In a normal rate environment, longer terms pay higher rates. A 1-year CD might yield 4.5–5.5% while a 5-year CD might yield 4.0–5.0% (yield curve can invert). Online banks often pay significantly more than traditional banks.

Early Withdrawal Penalty

Withdrawing before the maturity date triggers a penalty — commonly 60–150 days of interest depending on the term. Always factor this in before locking your money away.