How to use the cd calculator
- Enter the deposit amount and the rate from the bank's offer. Choose whether that rate is an APY or an APR.
- If the rate is an APR, pick the compounding frequency (daily is common). The calculator converts it to an APY for you.
- Enter the term as years plus extra months, such as 1 year and 6 months.
- Open More options to enter the early withdrawal penalty from your CD disclosure, and optionally the month you might withdraw. Read the maturity value, the interest earned and the yearly table.
Formula
APY = (1 + APR / m)^m - 1, where m is the number of compounding periods a year
Balance after t months = deposit x (1 + APY)^(t / 12)
Interest earned = balance at maturity - deposit
Penalty in days of interest = balance x APR x days / 365; in months of interest = balance x APR x months / 12
You receive on early withdrawal = balance at that month - penalty
An APY already includes the effect of compounding, so one year multiplies the deposit by 1 plus the APY. That is why the compounding frequency matters only when you start from an APR, or when a penalty is quoted as days of interest at the nominal rate.
Worked examples
An APY quote: $10,000 at 4.50% APY for 12 months grows to $10,450.00, so the interest is $450.00. The equivalent nominal rate compounded daily is 4.402%.
An APR quote: $25,000 at 4.80% APR compounded daily for 5 years has an APY of 4.917%. After year 1 the balance is $26,229.18, and at maturity it is $31,780.73, which is $6,780.73 of interest.
Early withdrawal: take the 4.50% APY CD above with a penalty of 90 days of interest. Withdrawing after 6 months, the balance is $10,222.52, the penalty is $110.96 and you receive $10,111.56. After only 3 months the balance is $10,110.65 and the penalty is $109.74, so you get back $10,000.91, which is almost exactly your deposit.
APY and APR on a CD offer
Banks usually advertise the annual percentage yield because it is the yearly growth after compounding, which makes offers comparable. The interest rate, sometimes called the APR or nominal rate, is the figure before compounding. A 4.80% rate compounded daily produces a 4.917% APY, and the gap widens as rates and compounding frequency rise. If two offers show different rates but the same APY, they will earn the same amount over a full year.
Use the rate type selector to match your offer. Compare CDs by APY, then check the term and the penalty terms. For a broader look at how compounding works, see the compound interest calculator.
How early withdrawal penalties work
Many CDs charge a penalty if you take money out before maturity. A common form is a number of days or months of interest, and it is sometimes larger for longer terms. Some banks take the penalty from principal when interest earned so far is smaller than the penalty. This calculator shows exactly that outcome: if the penalty is bigger than the interest earned, the "You receive" column falls below your deposit and a warning appears.
The penalty formula here uses simple interest at the nominal rate on the balance you withdraw. Your bank may calculate it on the original deposit, on only the amount withdrawn or at a different rate, so enter the days, months or dollars from your own disclosure and treat the result as an estimate.
Insurance, taxes and what you give up
Deposit insurance limits and rules depend on the institution and the ownership category of the account, so confirm coverage with the bank or the insurer. The FDIC publishes how its coverage works for bank deposits.
Interest on a CD is generally taxable in the year it is earned or credited, even if you leave it in the account, and this calculator does not subtract tax. A CD also locks the money. If you may need it soon, compare against the flexibility of a savings account, where the rate can change at any time.
Assumptions and limits
- The rate is fixed for the whole term and interest stays in the CD, compounding at the stated rate.
- Fractions of a year use the same yearly growth, so a 6-month CD on a 4.5% APY grows by 1.045^0.5. A bank that pays simple interest for a partial period may credit slightly different cents.
- The default rate and penalty are example values, not current market data. Use the rate and terms on your own offer.
- Penalties are calculated as simple interest at the nominal rate on the balance, or a flat amount you enter. Your bank's method may differ.
- Taxes, fees, rate changes at renewal, deposit insurance limits and inflation are not modeled.
- This is an estimate for planning, not financial advice or an offer.
Frequently asked questions
How do I calculate what a CD will earn?
Multiply the deposit by one plus the APY, raised to the power of the term in years. A $10,000 CD at 4.5% APY for one year ends at $10,450. If you only have an APR, convert it to an APY with the compounding frequency first.
Is a higher APY always the better CD?
Not by itself. A longer term may pay more but locks your money for longer, and the early withdrawal penalty decides how costly a change of plans would be. Compare the APY, the term and the penalty together.
Why does compounding frequency matter if I know the APY?
It does not change the value at maturity when you start from an APY. It matters when you only have an APR, because the same APR yields a different APY at daily versus annual compounding, and for penalties quoted at the nominal rate.
Can I lose principal on an early withdrawal?
Yes, at some banks. If the penalty exceeds the interest you have earned so far, the difference can come out of your deposit. The early withdrawal table flags those cases, such as withdrawing after 3 months with a 90-day penalty.
Does a CD pay interest monthly or at the end?
That depends on the bank. Some credit interest monthly to the CD or to a linked account, others pay at maturity. This calculator assumes interest stays in the CD and compounds, which is the usual way to compare offers.