CD Calculator
CD Basics
FDIC Insured
Up to $250,000 per depositor, per bank
Early Withdrawal
Typically incurs a penalty of 3-12 months interest
Current CD Rates*
*Rates vary by institution
Related Calculators
Understanding CDs
What is a CD?
A Certificate of Deposit (CD) is a savings product where you deposit money for a fixed term at a guaranteed interest rate. CDs typically offer higher rates than regular savings accounts in exchange for locking up your money.
CD Interest Formula
APY vs Interest Rate
Interest Rate
The stated rate before compounding. This is the simple rate used in calculations.
APY (Annual Percentage Yield)
The effective annual rate including compounding. This is what you actually earn. More frequent compounding = higher APY.
CD Terms and Early Withdrawal
| CD Term | Typical Penalty | Best For |
|---|---|---|
| 3-6 months | 3 months interest | Short-term savings, uncertain needs |
| 1 year | 3-6 months interest | Known expense in ~1 year |
| 2-3 years | 6-9 months interest | Medium-term goals |
| 5+ years | 12+ months interest | Long-term savings, laddering |
CD Laddering Strategy
A CD ladder spreads your investment across multiple CDs with different maturity dates. This provides regular access to funds while capturing higher long-term rates.
Example: $10,000 split into 5 CDs of $2,000 each maturing in 1, 2, 3, 4, and 5 years. Each year, reinvest the maturing CD into a new 5-year CD.
Types of CDs
Traditional CD
Fixed rate for fixed term. Most common type.
No-Penalty CD
Withdraw early without penalty. Usually lower rate.
Bump-Up CD
Option to increase rate once if rates rise.
Jumbo CD
Higher minimum ($100k+) for slightly higher rates.
Key Considerations
- CDs are FDIC insured up to $250,000 per depositor, per bank
- Interest is typically taxable as ordinary income
- Compare APY, not just interest rate, when shopping
- Consider inflation—if CD rate < inflation, you lose purchasing power
- Check renewal policies—some auto-renew at lower rates
Frequently Asked Questions
What is the difference between APR and APY for CDs?
APR (Annual Percentage Rate) is the stated interest rate without compounding. APY (Annual Percentage Yield) includes the effect of compounding, showing what you actually earn. A 5% APR compounded monthly equals about 5.12% APY. When comparing CDs, always compare APY for an accurate comparison of earnings.
What happens if I withdraw from a CD early?
Early withdrawal typically incurs a penalty, usually stated as a certain number of months' interest. For example, a 1-year CD might have a 3-month interest penalty, while a 5-year CD might penalize 6-12 months' interest. This can eat into your principal if you withdraw very early. Some banks offer no-penalty CDs at slightly lower rates.
What is a CD ladder and why should I use one?
A CD ladder spreads your money across multiple CDs with staggered maturity dates (e.g., 1, 2, 3, 4, and 5-year CDs). As each CD matures, you reinvest in a new long-term CD. This strategy provides regular access to funds while capturing higher long-term rates, reducing both interest rate risk and liquidity risk.
Are CDs a good investment right now?
CDs are best for money you won't need for a specific period and want to keep completely safe. They're FDIC insured up to $250,000 and offer guaranteed returns. However, CD rates may not beat inflation, meaning you could lose purchasing power over time. Compare current CD rates to inflation and consider your liquidity needs before investing.