CD Calculator
Calculate earnings from a Certificate of Deposit (CD). See how your CD grows with compound interest.
A $10,000 one-year CD at a 4.5% APY matures at $10,450, earning $450 of interest with the money locked for the full twelve months.
Calculator
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How This Calculator Works
CDs typically compound annually. The calculator uses:
FV = P × (1 + APY)^years
Worked example
Using the defaults — $10,000 deposited at a 4.5% APY for 1 year:
Read the APY correctly. APY is the effective annual yield, meaning the compounding has already been applied. You do not compound it again. $10,000 × 1.045 = $10,450.
Isolate the interest. $10,450 − $10,000 = $450, or $37.50 a month on average. That is the compensation for locking the money away.
Price the lock-up. A liquid savings account paying 3.0% APY would earn $300 over the same year. The CD's 1.5 percentage-point premium is worth $150 in exchange for not touching the money for twelve months.
Price the early-exit penalty. A typical one-year CD charges three months of interest for early withdrawal. Three months at 4.5% on $10,000 is about $112.50. So breaking the CD after six months to chase a better rate costs more than the better rate is likely to pay.
The calculator above returns $10,450 for these inputs. The penalty figures come from typical US bank terms; check your specific disclosure, because penalties vary from one month to twelve months of interest.
The same $10,000 across CD terms
Longer terms usually pay more, but the money is locked for longer and the penalty for leaving grows with the term.
| Term | Illustrative APY | Interest earned | Total at maturity |
|---|---|---|---|
| 6 months | 4.10% | $203 | $10,203 |
| 1 year (calculator default) | 4.50% | $450 | $10,450 |
| 2 years | 4.20% | $858 | $10,858 |
| 3 years | 4.10% | $1,281 | $11,281 |
| 5 years | 4.00% | $2,167 | $12,167 |
The 2-year row compounds: $10,000 × (1.042)^2 = $10,858. The 5-year row: $10,000 × (1.04)^5 = $12,167. Rates are illustrative only — actual CD rates move with Federal Reserve policy.
Common mistakes with this calculation
- Compounding the APY a second time. APY is already the compounded, effective rate. Applying (1 + APY)^years is correct; applying it monthly or treating it as a nominal rate overstates the return.
- Ignoring what the penalty actually costs. An early-withdrawal penalty of three months of interest on a 4.5% CD is about 1.125% of the principal. If you might need the money within the term, you are not comparing a 4.5% return with a 3% one — you are comparing 3.4% with 3%.
- Forgetting the income is taxable every year. CD interest is taxed as ordinary income in the year it accrues, even if you do not withdraw it. A 4.5% CD held in a taxable account by someone in the 22% bracket delivers roughly 3.5% after tax.
- Laddering nothing while chasing the highest rate. Putting everything into a single five-year CD means every dollar is locked at one rate. A ladder — equal amounts maturing each year — gives you a competitive blended rate and a maturity every twelve months so you are never fully stuck.
When this calculator does not apply
- The calculator assumes the CD runs to maturity with no early withdrawal and no additional deposits.
- It holds the APY constant for the full term, which is correct for a fixed-rate CD but wrong for a variable-rate or bump-up CD.
- Federal deposit insurance covers $250,000 per depositor, per institution, per ownership category. Amounts above that carry bank credit risk.
- Tax is not modelled. Interest is taxable annually in a non-retirement account.
- It does not account for inflation. A five-year CD at 4% against 3% inflation locks in roughly 1% of real return.
Frequently Asked Questions
What is a CD?
A Certificate of Deposit is a time deposit account. You agree to keep money in the CD for a set term, and the bank pays a fixed interest rate (APY).
What happens if I withdraw early?
Early withdrawal usually incurs a penalty, typically 3-12 months of interest depending on the CD term. Some CDs are "no-penalty" but offer lower rates.
Sources & Methodology
This calculator uses standard financial formulas. See our methodology page for the full formula derivation.
- Your Insured Deposits Federal Deposit Insurance Corporation
- National Rates and Rate Caps Federal Deposit Insurance Corporation
- Share Insurance Coverage National Credit Union Administration
- Interest Income and Taxes Internal Revenue Service
- Savings Tools Consumer Financial Protection Bureau
Last reviewed .
Key takeaways
- $10,000 at a 4.5% APY for one year matures at $10,450 — $450 of interest.
- APY already includes compounding. Do not apply the growth factor twice.
- The early-withdrawal penalty is often larger than the rate advantage you were chasing.
- CD interest is taxable each year even when left in the account.
- A ladder spreads maturities so you are never fully locked in at one rate.