CD Calculator – NerdWallet

NerdWallet’s CD calculator shows what you can earn with a certificate of deposit, a type of savings account that you leave untouched for months or years. Like regular savings accounts, CDs are safe because they are federally insured. Here’s what to know about CDs and using the CD calculator.

• Prioritize finding a high interest rate. Not every bank has competitive rates on its CDs. See our list of the best CD rates.

• Avoid early withdrawal fees. Although short-term CDs require less time to wait to access your money and therefore less need to incur the penalty to get money early, long-term certificates have more time to earn interest. (Breaking a CD early for a better rate can sometimes make sense, though.)

• Longer terms don’t always mean higher rates. The 2024 rate environment has seen higher rates on the best one-year CDs compared to three- or five-year CDs.

The calculator has sample numbers to provide a starting point, but feel free to use your own numbers.

1. Enter the deposit amount, or the fixed amount of money you’re comfortable leaving in a CD untouched for the whole term.

2. Enter the CD term length, and select years or months. Use whole numbers only. For example, choose 18 months instead of 1.5 years.

3. Enter the APY. Plug in current CD rates at various online banks as well as your bank’s CD rates to compare different options.

Total interest earned: The sum the bank pays you based on a CD’s rate, term and initial deposit.

Total balance: The sum you receive when you withdraw after a CD’s maturity date. The total amount includes the initial deposit and all compound interest.

This CD calculator uses the following assumptions:

• You have CDs at a bank and share certificates at a credit union. What isn’t covered are brokered CDs, meaning CDs offered by a brokerage firm, which don’t compound interest.

• You choose to have interest grow in your CD. Many banks offer two options to receive CD interest: Keep it in the CD for the term, which is most common, or receive interest as regular payments to a separate account. The second option can provide a stable source of fixed income at a regular frequency, such as monthly or quarterly. But taking regular interest payments out of a CD means that interest doesn’t compound since your ongoing CD balance doesn’t increase.

• You don’t withdraw from a CD early. Keeping your money in a CD until the maturity date ensures you earn the full amount of interest. An early withdrawal usually means paying a penalty and forfeiting the remaining interest you would’ve received.

Deposit amount: The upfront sum you’re putting into a single CD. You can usually only add money to a CD once.

CD term length: The total time frame that a CD is open for. Some of the most common terms are three months, six months, one year, 18 months, three years and five years. Learn about choosing between short-term and long-term CDs.

APY: Annual percentage yield is a percentage that reflects the amount of money a bank pays you, or the interest, in a bank account in one year. It includes compound interest, which is the interest earned on both an account balance and previous interest. Put more simply, APY is the annual rate of return that factors in compounding. CD rates are usually quoted as an APY, and banks and credit unions usually compound interest daily or monthly. Learn about how APY works.

CD interest: Money your bank pays you on the balance of a CD, usually expressed as an annual percentage yield. Learn more about how interest works.

Compounding frequency: The number of times your bank pays interest, such as daily, monthly or annually. Learn more about compound interest.

Historically, the longer the term, the higher the rate tends to be. But the current rate environment shows higher rates on shorter terms. Just remember that even if a short-term CD has a higher rate, it has less time to earn interest than a long-term CD does.

Standard terms range from three months to five years. Most have early withdrawal penalties, so be sure you won’t need the money before the term expires.

The amount of interest earned on a CD varies based on your deposit, CD rate and term length. For example, a $10,000 deposit in a five-year CD with 3.50% APY would earn around $1,877 in interest. The same CD with a 1.50% APY would earn around $773 in interest, and the same CD with a 0.01% APY would earn only $5 in interest.

If you’d prefer to try your hand at calculating interest without a calculator, use the compound interest formula:

A = P(1 + r/n)^nt, where:

• A = ending amount (this means original balance plus all interest earned after n years).

• P = original balance (or your initial deposit, since there are typically no other contributions to CDs).

• r = interest rate (as a decimal)*.

• n = number of times interest is compounded per year (typically 365 for daily, 12 for monthly, 4 for quarterly).

Once you get a result for A, subtract P from A (A – P) to get the interest amount.

*Note: Interest rate and APY are slightly different. To be more exact, use the interest rate in the formula. See our APY vs. interest rate explainer, which includes a calculator to convert APY to interest rate.