How the CD calculator works
A certificate of deposit pays a fixed rate for a fixed term. Interest is added to the balance at regular intervals and then earns interest itself. The calculator uses the standard compound-interest formula:
Ending balance = P × (1 + r ÷ n)n × t
where P is the deposit, r the nominal annual rate, n the compounding periods per year and t the term in years. If you enter an APY, the calculator converts it to the matching nominal rate first, so a 12-month CD at 4.50% APY earns exactly 4.50% whatever the compounding.
Worked example
You deposit $15,000 in an 18-month CD at 4.25% APY. The balance at maturity is 15,000 × 1.04251.5 = $15,966.34, so you earn $966.34 in interest. In a 22% tax bracket about $753.74 is left after federal tax.
APY vs. rate at a glance
| Nominal rate | Daily | Monthly | Quarterly | Annually |
|---|---|---|---|---|
| 3.00% | 3.05% | 3.04% | 3.03% | 3.00% |
| 4.00% | 4.08% | 4.07% | 4.06% | 4.00% |
| 5.00% | 5.13% | 5.12% | 5.09% | 5.00% |
Choosing a CD
- Match the term to your timeline. Money you might need within a year belongs in a short CD or a high-yield savings account.
- Consider a ladder. Splitting savings across 6-, 12-, 18- and 24-month CDs gives regular access to cash and averages out rate changes.
- Read the penalty terms. No-penalty CDs pay slightly less but let you withdraw early.
- Stay within insurance limits. Check coverage on the FDIC's site if you hold more than $250,000 at one bank.
Saving for retirement rather than a short-term goal? The 401(k) calculator projects long-term growth with employer matching.
For education only, not financial advice. Rates and terms vary by institution.
Frequently asked questions
What is the difference between APY and interest rate?
The interest rate (APR) is the nominal yearly rate. APY includes the effect of compounding during the year. A 5.00% rate compounded monthly is a 5.12% APY. Banks advertise CDs by APY, so enter the APY when you have it.
How is CD interest calculated?
Balance = deposit × (1 + r/n)^(n × years), where r is the annual rate and n is the number of compounding periods per year. Interest is the balance minus the deposit.
Is CD interest taxable?
Generally yes. Interest on a CD held in a regular account is taxed as ordinary income in the year it is credited, even if you don't withdraw it. Enter your tax rate to see the after-tax figure.
What happens if I withdraw early?
Most CDs charge an early withdrawal penalty, often a few months of interest. Check your bank's disclosure, because the penalty can eat into principal on short-held CDs.
Are CDs insured?
CDs at FDIC-insured banks are covered up to $250,000 per depositor, per insured bank, per ownership category. Credit union share certificates have similar NCUA coverage.
Sources and official references
- Deposit Insurance – Federal Deposit Insurance Corporation (FDIC)
- Compound interest calculator and savings basics – U.S. Securities and Exchange Commission – Investor.gov
Last reviewed October 10, 2026. Results are estimates for planning; see our disclaimer.
