CD Calculator
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Result
Value at maturity
- Interest earned
- $434
- Effective annual yield (APY)
- 4.34%
- Average interest per month
- $36.18
- Early withdrawal would cost
- $106
- Total return over the term
- 4.34%
- A nominal 4.25% compounded daily is an APY of 4.341%. Banks advertise the APY, so that is the figure to compare between accounts.
Month-by-month balance
| Month | Interest to date | Balance |
|---|---|---|
| 1 | $35.48 | $10,035 |
| 2 | $71.08 | $10,071 |
| 3 | $107 | $10,107 |
| 4 | $143 | $10,143 |
| 5 | $179 | $10,179 |
| 6 | $215 | $10,215 |
| 7 | $251 | $10,251 |
| 8 | $287 | $10,287 |
| 9 | $324 | $10,324 |
| 10 | $360 | $10,360 |
| 11 | $397 | $10,397 |
| 12 | $434 | $10,434 |
How is CD interest calculated?
CD interest is calculated with compound interest: the balance is multiplied by one plus the periodic rate, raised to the number of compounding periods in the term. A $10,000 CD at 4.25% compounded daily over 12 months pays about $434 and matures at $10,434.
A = P(1 + r/n)^(n·t) APY = (1 + r/n)^n − 1- A
- Value at maturity
- P
- Deposit
- r
- Nominal annual rate
- n
- Compounding periods per year
- t
- Term in years
A CD is the simplest compound-interest product there is: one deposit, one rate, one term, no contributions. The only subtlety is the difference between the nominal rate and the APY. The nominal rate is what accrues per period; the APY is what a full year actually returns once compounding inside the year is counted. A nominal 4.25% compounded daily is an APY of 4.341%, and because US banks are required to advertise the APY, comparing a quoted APY against another bank's nominal rate will mislead you. The second thing worth understanding is the early withdrawal penalty, which is quoted in months of interest rather than as a percentage of the balance. Three months of interest on a $10,000 CD at 4.25% is about $106 — modest, but on a short term it can exceed everything the CD has earned so far, and on some products the penalty can eat into the principal.
- Divide the nominal annual rate by the compounding periods per year.
- Add one to that periodic rate.
- Raise it to the power of periods per year times the term in years.
- Multiply by the deposit to get the value at maturity.
- Subtract the deposit to find the interest earned.
Worked example: A $10,000 deposit at 4.25% for 12 months, compounded daily
A $10,000 deposit at 4.25% for 12 months, compounded daily
The daily rate is 4.25% ÷ 365 = 0.011644%, and a 12-month term is 365 compounding periods. The balance at maturity is 10,000 × (1.00011644)^365 = $10,434.04, so the interest earned is $434.04. Note that this exceeds a flat 4.25% of $10,000, which would be $425 — the extra $9 is compounding, and it is exactly why the APY of 4.341% is higher than the quoted 4.25%. The early withdrawal penalty is calculated differently from the interest: three months of interest at the nominal rate is 10,000 × 0.0425 ÷ 12 × 3 = $106.25. Breaking the CD at month six, having earned about $215, would leave you with roughly $109 of it. On a 6-month CD at the same rate the same penalty would wipe out nearly everything earned.
What each cd input means
- Deposit amount
- The principal you are locking away. Most CDs have a minimum, commonly $500 or $1,000, and some pay a better rate above a threshold.
- Interest rate
- The quoted nominal rate. If the bank advertises an APY instead, that figure already includes compounding — enter the nominal rate and compare against the APY this returns.
- Term
- How long the money is locked away. Withdrawing before maturity normally forfeits interest.
- Compounding frequency
- How often the bank credits interest. Most US CDs compound daily or monthly; the disclosure statement says which.
- Early withdrawal penalty
- Penalties are quoted in months of interest, not as a percentage. Three to six months is typical on a one-year CD.
What this cd does not account for
- Rates are fixed for the term, which is the point of a CD, but it also means you cannot benefit if rates rise. A CD ladder — several CDs maturing in successive years — is the usual answer.
- Tax is not applied. CD interest is taxed as ordinary income in the year it is credited, even if you do not withdraw it, and that is reported on a 1099-INT.
- Early withdrawal penalties vary widely and some can reach into the principal. The figure here assumes the penalty is capped at interest earned, which is common but not universal.
- Some CDs pay interest out monthly rather than compounding it. Those return less at maturity than this calculator shows, because the interest is not left to compound.
- Promotional and bump-up CDs change rate mid-term and are not modelled. Nor are callable CDs, which the bank can close early.
- FDIC insurance covers $250,000 per depositor per bank. A deposit above that at one institution is not fully insured.
Frequently asked questions
How much interest will a $10,000 CD earn?
About $434 over 12 months at 4.25% compounded daily, maturing at $10,434. The exact figure depends on the rate and compounding frequency, and daily compounding returns slightly more than monthly at the same nominal rate.
What is the difference between APR and APY on a CD?
APR is the nominal rate before compounding; APY is what a full year actually returns once compounding is counted. A nominal 4.25% compounded daily gives an APY of 4.341%. US banks must advertise the APY.
What happens if I withdraw from a CD early?
You pay a penalty, normally quoted in months of interest rather than as a percentage. Three to six months is typical on a one-year CD, and on a short term it can exceed everything earned so far.
Is a CD better than a high-yield savings account?
A CD locks the rate, which wins when rates are falling; a savings account stays liquid and follows rates up. The trade is access versus certainty, and a CD ladder is the usual compromise.
Is CD interest taxable?
Yes, as ordinary income in the year it is credited, whether or not you withdraw it. Banks report it on a 1099-INT. Holding a CD inside an IRA shelters the interest from that annual tax.
What is a CD ladder?
Splitting your money across CDs with staggered maturities — say one, two and three years. One matures each year, so part of the money is always accessible and can be reinvested at whatever rates then prevail.
Sources and review
“The standard insurance amount is $250,000 per depositor, per insured bank, for each account ownership category.”
Deposit insurance coverage limits — Federal Deposit Insurance Corporation
Last reviewed .