CD Calculator
Calculate what a certificate of deposit is worth at maturity, and what an early withdrawal penalty would cost you.
How to use this calculator
- 1Enter the deposit amount, rate and term from the CD offer.
- 2Check the compounding frequency — daily is standard for most US bank CDs.
- 3Turn on early withdrawal to see what breaking the CD early would actually cost you.
How the calculation works
Maturity value = P × (1 + r/n)^(n×t)- P
- Deposit amount
- r
- Nominal annual interest rate
- n
- Compounding periods per year
- t
- Term in years
CDs are usually quoted with daily compounding, which is why the default here is 365 — most US banks compound daily and credit monthly.
The early withdrawal penalty is modelled as a fixed number of months of interest on the principal, capped so it never eats into your original deposit — the standard consumer protection most banks apply.
Worked example
$10,000 at 4.5% APR, daily compounding, 12-month term
- 1.Daily rate: 4.5% ÷ 365 = 0.012329% per day.
- 2.Maturity value: 10,000 × (1 + 0.045/365)^365 = $10,460.25.
- 3.Interest earned: $460.25, an APY of 4.602% — slightly above the nominal 4.5% rate because of daily compounding.
Result: $10,460.25 at maturity, 4.602% APY
What a CD actually is
A certificate of deposit is a time deposit: you hand a bank a sum of money for a fixed period, and in exchange it pays a fixed rate that is typically higher than an ordinary savings account. The higher rate is compensation for giving up flexibility — unlike a savings account, the money is not meant to move in and out freely until the term, or "maturity," ends.
In the United States, CDs from banks are insured by the FDIC up to the standard coverage limit, the same protection that applies to checking and savings accounts, which is part of why they are considered one of the lower-risk places to park cash for a known period.
The trade-off every CD is built on
Three variables define a CD, and they pull against each other in predictable ways.
- Term length — how long the money is locked up, from a few months to several years. Longer terms have historically tended to offer higher rates, though the relationship between short- and long-term rates shifts with the broader interest rate environment.
- Rate and compounding — the stated rate is nominal; how often it compounds (daily, monthly, quarterly) determines the actual annual percentage yield you earn, which is always at or above the nominal rate.
- Liquidity — the price of the better rate is reduced access — pulling money out before maturity usually triggers a penalty, unlike a savings account you can draw from anytime.
What breaking a CD early really costs
Early withdrawal penalties are typically expressed as a number of months of interest, not a flat fee or a cut into your original deposit. A common structure charges a few months of interest for shorter-term CDs and considerably more for longer ones, reflecting the greater opportunity the bank loses when a long-term commitment ends early.
Most banks cap the penalty so it cannot exceed the interest actually earned, which protects the original deposit itself — the worst realistic outcome from an early withdrawal is walking away with less interest than expected, not less principal than you put in. The specific formula and cap vary by institution, so the account disclosure is the source that matters, not a general rule of thumb.
CD laddering
A CD ladder is a way to capture higher long-term rates without giving up all access to cash at once. Rather than putting an entire sum into a single CD, it is split across several with staggered maturity dates.
- 1Split the total — divide the amount you want to invest across several CDs of different terms — for example, one, two, three, four and five years.
- 2Let each one mature in turn — as each CD matures, part of the ladder becomes accessible cash on a predictable, recurring schedule rather than all of it being locked up at once.
- 3Reinvest at the long end — when a CD matures, roll it into a new long-term CD to keep the ladder going, capturing whatever the current long-term rate happens to be rather than betting the whole sum on a single rate at a single moment.
What this assumes, and where it stops
Assumptions
- The rate is fixed for the full term, as is standard for a CD (as opposed to a variable-rate savings account).
Limitations
- Early withdrawal penalty terms vary significantly by bank — always check the actual disclosure rather than relying on the typical figures modelled here.
- Does not account for CD ladder strategies (splitting funds across CDs with staggered maturities).
Common questions
What is the difference between the interest rate and the APY?
The interest rate (APR) is the nominal annual rate before compounding. The APY is what you actually earn once compounding is included, and is always equal to or higher than the nominal rate. Banks are required to advertise the APY because it is the number that lets you compare offers fairly.
Can I lose money on a CD?
Not your principal, at a bank insured by the FDIC (in the US) up to the coverage limit — the worst an early withdrawal penalty can typically do is reduce the interest you have earned, not take back money you deposited, which is how this calculator models the penalty.
Formula and content last reviewed on .
Results are estimates for information only, not professional advice.
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