CD Rate Calculator
Calculate your Certificate of Deposit (CD) earnings, APY, and total return over time.
Complete Guide to Certificate of Deposit (CD) Investing
A Certificate of Deposit (CD) is one of the safest investment vehicles available, offering guaranteed returns with FDIC insurance protection. Learn how to maximize your CD returns and build a smart savings strategy. See how compounding affects your returns with our Compound Interest Calculator.
What is a Certificate of Deposit?
A Certificate of Deposit (CD) is a savings product offered by banks and credit unions that pays a fixed interest rate for a specified term. In exchange for a higher rate than regular savings accounts, you agree not to withdraw your money until the CD matures. CDs are insured by the FDIC up to $250,000 per depositor, per institution.
Types of CDs
Traditional CD
Fixed rate for a set term. Early withdrawal penalties apply.
No-Penalty CD
Withdraw without penalty, but typically lower rates.
Bump-Up CD
Option to increase rate once if rates rise during term.
Jumbo CD
Higher minimum deposit ($100k+) for better rates.
CD Laddering Strategy
CD laddering is a strategy where you spread your investment across multiple CDs with different maturity dates. For example, instead of putting $10,000 into a single 5-year CD, you could invest $2,000 each into 1, 2, 3, 4, and 5-year CDs.
- Regular access: One CD matures each year, providing liquidity
- Rate averaging: Reduces the impact of rate fluctuations
- Flexibility: Reinvest maturing CDs at current rates or use the funds
CD Rate Comparison Chart
| Term | Typical APY Range | Best For |
|---|---|---|
| 3 Months | 4.00% - 4.75% | Short-term parking of funds |
| 6 Months | 4.50% - 5.25% | Emergency fund portion |
| 1 Year | 4.75% - 5.50% | Most popular choice |
| 2-3 Years | 4.25% - 5.00% | Medium-term goals |
| 5 Years | 4.00% - 4.75% | Locking in high rates long-term |
CD vs Other Savings Options
- CD vs High-Yield Savings: CDs lock in rates; HYSA rates fluctuate but offer flexibility
- CD vs Treasury Bills: T-bills are state tax-exempt; CDs may have slightly higher rates
- CD vs Money Market: Money markets offer check-writing; CDs have fixed terms
- CD vs Bonds: CDs are FDIC insured; bonds have market risk but potential for higher returns
Frequently Asked Questions
What is the difference between Interest Rate and APY?
The Interest Rate is the nominal rate banks advertise, while APY (Annual Percentage Yield) includes the effect of compounding. APY is always higher than the nominal rate and is the true measure of your annual return.
What happens if I withdraw early from a CD?
Early withdrawal typically incurs a penalty, usually 3-6 months of interest for shorter terms and 12+ months for longer terms. Some banks may dip into principal if not enough interest has accrued.
Are CD earnings taxable?
Yes, CD interest is taxed as ordinary income in the year it is credited to your account, even if you don't withdraw it. You'll receive a 1099-INT form for interest over $10.
How does compounding frequency affect my return?
Daily compounding yields slightly more than monthly, which yields more than annually. On a $10,000 CD at 5% for 1 year: daily = $5,127 interest, monthly = $5,116, annually = $5,000.
Should I choose a CD or HYSA in a falling rate environment?
When rates are expected to fall, locking in a longer-term CD can be advantageous. HYSA rates will decrease with market rates, but your CD rate is guaranteed for the full term.