How This CD Calculator Works

A certificate of deposit grows by compound interest: each compounding period, interest is added to the balance, and the next period's interest is charged on the larger balance. Maturity value = deposit × (1 + APY ÷ n)n × t, where n is the number of compounding periods per year and t is the term in years. The effective annual yield line shows what the quoted rate really delivers at your chosen compounding frequency — with monthly compounding it comes out slightly above the quoted rate, because each month's interest starts earning interest too.

Worked example: $10,000 at 4.5% APY for 12 months, compounded monthly. Maturity value = $10,000 × (1 + 0.045 ÷ 12)12 = $10,459.40, so interest earned = $459.40. The effective annual yield is 4.59% — slightly above the 4.5% APY because monthly compounding adds a little extra over the year.

Practical tips

APY is the number to compare, not the rate.

Two CDs can quote the same interest rate but different APYs if they compound differently. APY already includes compounding, so compare APYs directly.

Longer terms usually pay more — but lock you in.

A 5-year CD typically pays more than a 1-year CD. Only lock money you will not need before maturity, or the early-withdrawal penalty can erase the extra yield.

Check the early-withdrawal penalty first.

Many banks charge several months of interest if you cash out early. On a short CD, that penalty can exceed the interest earned.

CDs are for money with a date, not for growth.

Use a CD for a known future expense — a house deposit in two years, for example. For long-term growth, diversified investments have historically earned more, with more risk.