A CD calculator estimates how much a certificate of deposit will earn by compounding your deposit at a fixed APY over the term you choose. Enter the deposit, the APY your bank quotes, and the term length. The readout shows the maturity value, the interest earned, and the effective APY.
How to use it
- Enter your initial deposit, the amount you put into the CD on day one.
- Enter the APY (annual percentage yield) exactly as your bank quotes it.
- Pick the term length, usually 6, 12, 24 or 60 months.
- Set the compounding frequency. Daily is the most common for CDs. Read the maturity value and interest earned from the readout.
The formula
P = principal (deposit), r = APY as a decimal, n = compounding periods per year, t = years.
Note the input is APY, not APR. APY already includes the effect of compounding, which is why banks quote it for CDs.
Worked example
Maturity value = 10,000 × (1 + 0.045/365)365 = $10,460.25
Interest earned = $10,460.25 − $10,000 = $460.25
Frequently asked questions
What is the difference between a CD rate and CD APY?
The CD rate (APR) is the nominal yearly rate before compounding. APY is the effective yearly rate after compounding is included. APY is the number that tells you what you actually earn, so it is the better figure for comparing CDs.
How is CD interest calculated?
With the compound interest formula above. Most banks compound daily, which gives a slightly higher effective yield than monthly or annual compounding at the same quoted rate.
What is a certificate of deposit?
A CD is a bank savings product that locks your money for a fixed term in exchange for a fixed, usually higher, interest rate than a regular savings account.
Does compounding frequency matter much?
A little. On $10,000 at 4.50% APY for one year, daily compounding earns about $2 more than annual compounding. The bigger the deposit and the longer the term, the more it matters.
Do I pay tax on CD interest?
Yes, CD interest is generally taxed as ordinary income in the year it is earned, even if you do not withdraw it. This is general information, not tax advice.
What happens if I withdraw early?
Banks typically charge an early withdrawal penalty, often several months of interest. Check your bank’s terms before opening the CD.