CD Calculator

How a CD earns interest

A certificate of deposit (a share certificate at a credit union) is a deposit you agree to leave with the bank for a fixed term in return for a rate that is fixed for that whole term. Interest is added to the balance at the compounding frequency in the account disclosure and then earns interest itself. At maturity you get the deposit plus all the interest.

That makes a CD simpler than an open savings account, and the calculator works differently:

• One deposit, no top-ups. Most CDs don’t accept additions after opening. To plan regular deposits toward a target, use the savings calculator.
• A fixed term with an end date. The result is the value on the maturity date, not an open-ended projection. For a general growth projection at any rate and frequency, the compound interest calculator is the better fit.
• The advertised figure is the APY. The Truth in Savings rule requires banks to disclose the annual percentage yield, so that is the default input. If you only have the nominal rate, switch the rate to “Nominal” and pick the compounding frequency; the calculator converts one to the other.
• Money is locked in. Taking money out before maturity usually triggers an early withdrawal penalty. Penalties differ between banks, so this calculator does not guess one.

The CD formula

With the APY known, the balance at maturity is a single step:

If you start from a nominal rate r compounded m times a year, convert it first:

B

balance at maturity

P

the amount deposited

APY

annual percentage yield, as a decimal (4.5% → 0.045)

r

nominal annual interest rate, as a decimal

m

compounding periods per year: 365 daily, 12 monthly, 4 quarterly, 2 semiannually, 1 annually

Regulation DD (the Truth in Savings rule) defines the APY a bank discloses from the interest a deposit earns over its term:

For a one-year term this is simply interest ÷ principal. The regulation’s own example is a $1,000 six-month CD earning $30.37 over 182 days, which has an APY of 6.18%. Because this calculator grows the deposit by (1 + APY) raised to the fraction of a year, it reproduces the disclosed APY for any term.

Tax is applied to the interest at the rate you enter, and the inflation adjustment divides the after-tax balance by (1 + inflation)^(months ÷ 12) to express it in today’s money. Balances are rounded to the cent at the end of each row of the table.

Worked example

You put $10,000 into a 12-month CD advertised at 4.5% APY, compounded daily. Your tax rate on interest is 22% and you expect 3% inflation.

1. Growth factor: (1 + 0.045)^(12 ÷ 12) = 1.045
2. Balance at maturity: $10,000 × 1.045 = $10,450.00, so $450.00 of interest
3. The nominal rate behind that APY with daily compounding: 365 × (1.045^(1/365) − 1) = 4.402%
4. Tax: $450.00 × 22% = $99.00, leaving $351.00 of interest and a balance of $10,351.00
5. In today’s money: $10,351.00 ÷ 1.03 = $10,049.51 — a real gain of $49.51, or about 0.495% a year after tax and inflation

The same money in a 24-month CD at a 5% nominal rate compounded monthly would grow to $10,000 × (1 + 0.05 ÷ 12)^24 = $11,049.41 before tax.

Deposit insurance, penalties and taxes

• Insurance limit. CDs at FDIC-insured banks are covered up to $250,000 per depositor, per insured bank, for each account ownership category. Share certificates at federally insured credit unions have the same $250,000 standard coverage from the NCUA. Money above the limit at one institution, in the same ownership category, is not insured.
• Early withdrawal. Under Regulation DD the bank must tell you, before you open the CD, whether a penalty applies for early withdrawal, how it is calculated and when it is charged. Read that disclosure before comparing a CD’s yield with an account you can leave at any time.
• Renewal. The same disclosure states whether the CD renews automatically at maturity and whether there is a grace period to withdraw without penalty. A renewed CD earns whatever rate the bank offers then.
• Tax. In the US, interest on certificates of deposit is taxable interest income. The calculator applies one flat rate to the total interest; in practice interest on a multi-year CD is usually taxed year by year as it is earned, not all at maturity.

What this calculator leaves out

• Interest paid out to you instead of left in the CD. Some CDs send interest to a checking account; then the interest does not compound and the total is closer to simple interest.
• Step-up, bump-up, callable and variable-rate CDs, whose rate can change during the term.
• Brokered CDs bought or sold before maturity, whose market price moves with interest rates.
• Day-count details. Terms are handled in whole months as fractions of a year; a bank counting the actual days between dates can differ by a few cents.