What is a CD (certificate of deposit) and how does it work?

A certificate of deposit (CD) is a savings product offered by banks and credit unions with a fixed interest rate and fixed term — typically 3 months to 5 years. You deposit money, leave it untouched for the term, and receive the principal plus interest at maturity. CDs typically pay higher interest than regular savings accounts because you commit to not withdrawing early. In 2026, 1-year CD rates at competitive institutions range from 4.5% to 5.5% APY. Early withdrawal penalties typically forfeit 90–180 days of interest.

What is the difference between APR and APY for a CD?

APR (Annual Percentage Rate) is the stated rate before compounding. APY (Annual Percentage Yield) reflects the actual return after compounding. For a CD at 5.00% APR compounded monthly: APY = (1 + 0.05/12)^12 − 1 = 5.116%. The more frequent the compounding, the higher the APY relative to APR. Always compare CDs using APY — it is the true return. Daily compounding gives the highest APY (5.127% for 5% APR), but the difference vs. monthly compounding is very small.

How much interest does a $10,000 CD earn at 5.25%?

A $10,000 CD at 5.25% APR with monthly compounding over 12 months earns: A = 10,000 × (1 + 0.0525/12)^12 = $10,537.99. Interest earned = $537.99. APY = 5.378%. Over 24 months: $11,105.96 ($1,105.96 interest). Over 5 years: $12,961.76 ($2,961.76 interest). CD interest is taxed as ordinary income in the year it is earned (or available), even if you do not withdraw it before maturity.

Is a CD better than a high-yield savings account?

CDs generally offer higher rates than HYSAs in exchange for locking up your money for a fixed term. In 2026, top 1-year CDs offer 5.0–5.5% APY while top HYSAs offer 4.5–5.0% APY. CDs win on rate but lose on flexibility — you cannot make additional deposits or withdrawals without penalty. HYSAs are better for emergency funds or money you might need within the year. CDs are better when you have a lump sum you will not need for 6–18 months and want to lock in today's rate before rates drop.

What is CD laddering and how does it work?

CD laddering is a strategy where you split your investment across CDs with different maturity dates (e.g., $10,000 split into five $2,000 CDs maturing in 1, 2, 3, 4, and 5 years). Benefits: you get partial access to funds every year without early-withdrawal penalties; you can reinvest maturing CDs at whatever rate is available; and you reduce the risk of locking all money into one rate environment. When each CD matures, reinvest in a new 5-year CD to maintain the ladder. This strategy balances yield and liquidity.

What happens if I withdraw from a CD early?

Early withdrawal from a CD before its maturity date triggers a penalty — typically 90 days of interest for terms under 1 year, and 150–180 days of interest for terms of 1–5 years. Some banks charge 1 year of interest for 5-year CDs. Example: $10,000 at 5.25% APR, 180-day penalty = $10,000 × 5.25% × (180/365) = $258.90 forfeited. If you need access to funds before the CD matures, consider a no-penalty CD (usually slightly lower rate) or a HYSA instead. Always read the penalty terms before opening.

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CD Rate Calculator

CD maturity value = P × (1 + r/n)^(nt), where P = principal, r = annual rate, n = compounding periods/year, t = term in years. APY = (1 + r/n)^n − 1. A $10,000 CD at 5.25% APR compounded monthly for 12 months grows to $10,537.99 (APY 5.378%, $537.99 interest). CD interest is taxed as ordinary income. Early withdrawal typically forfeits 90–180 days of interest.

Calculate certificate of deposit (CD) maturity value, interest earned, and APY. Enter your deposit amount, annual interest rate, term, and compounding frequency (daily, monthly, quarterly, annually). Includes a year-by-year growth schedule for multi-year CDs.

CD Details

Deposit Amount ($)

Annual Interest Rate (%)

Term

Unit

Compounding Frequency

Results

Maturity Value

$10,537.82

Interest Earned

$537.82

APY

5.378%

Effective Return over Term

5.378%

Formula: A = P(1 + r/n)^(nt) where P = principal, r = annual rate, n = compounding periods/year, t = time in years. APY = (1 + r/n)^n − 1. CD interest is typically taxed as ordinary income in the year earned.

How to Use

1
Enter your deposit amount
Input the principal — the amount you plan to deposit into the CD. Most CDs have minimum deposits of $500–$1,000.
2
Enter the annual interest rate
Enter the CD rate as a percentage (e.g., 5.25 for 5.25%). This is the APR quoted by the bank. The calculator computes APY based on compounding frequency.
3
Set the term and compounding frequency
Choose the CD term in months or years, and select how often interest compounds (daily, monthly, quarterly, annually). Most CDs compound daily or monthly.
4
Read the results
See your maturity value, total interest earned, and APY. For multi-year CDs, the growth schedule shows your balance at the end of each year.

Frequently Asked Questions

What is a CD (certificate of deposit) and how does it work?: A certificate of deposit (CD) is a savings product offered by banks and credit unions with a fixed interest rate and fixed term — typically 3 months to 5 years. You deposit money, leave it untouched for the term, and receive the principal plus interest at maturity. CDs typically pay higher interest than regular savings accounts because you commit to not withdrawing early. In 2026, 1-year CD rates at competitive institutions range from 4.5% to 5.5% APY. Early withdrawal penalties typically forfeit 90–180 days of interest.
What is the difference between APR and APY for a CD?: APR (Annual Percentage Rate) is the stated rate before compounding. APY (Annual Percentage Yield) reflects the actual return after compounding. For a CD at 5.00% APR compounded monthly: APY = (1 + 0.05/12)^12 − 1 = 5.116%. The more frequent the compounding, the higher the APY relative to APR. Always compare CDs using APY — it is the true return. Daily compounding gives the highest APY (5.127% for 5% APR), but the difference vs. monthly compounding is very small.
How much interest does a $10,000 CD earn at 5.25%?: A $10,000 CD at 5.25% APR with monthly compounding over 12 months earns: A = 10,000 × (1 + 0.0525/12)^12 = $10,537.99. Interest earned = $537.99. APY = 5.378%. Over 24 months: $11,105.96 ($1,105.96 interest). Over 5 years: $12,961.76 ($2,961.76 interest). CD interest is taxed as ordinary income in the year it is earned (or available), even if you do not withdraw it before maturity.
Is a CD better than a high-yield savings account?: CDs generally offer higher rates than HYSAs in exchange for locking up your money for a fixed term. In 2026, top 1-year CDs offer 5.0–5.5% APY while top HYSAs offer 4.5–5.0% APY. CDs win on rate but lose on flexibility — you cannot make additional deposits or withdrawals without penalty. HYSAs are better for emergency funds or money you might need within the year. CDs are better when you have a lump sum you will not need for 6–18 months and want to lock in today's rate before rates drop.
What is CD laddering and how does it work?: CD laddering is a strategy where you split your investment across CDs with different maturity dates (e.g., $10,000 split into five $2,000 CDs maturing in 1, 2, 3, 4, and 5 years). Benefits: you get partial access to funds every year without early-withdrawal penalties; you can reinvest maturing CDs at whatever rate is available; and you reduce the risk of locking all money into one rate environment. When each CD matures, reinvest in a new 5-year CD to maintain the ladder. This strategy balances yield and liquidity.
What happens if I withdraw from a CD early?: Early withdrawal from a CD before its maturity date triggers a penalty — typically 90 days of interest for terms under 1 year, and 150–180 days of interest for terms of 1–5 years. Some banks charge 1 year of interest for 5-year CDs. Example: $10,000 at 5.25% APR, 180-day penalty = $10,000 × 5.25% × (180/365) = $258.90 forfeited. If you need access to funds before the CD matures, consider a no-penalty CD (usually slightly lower rate) or a HYSA instead. Always read the penalty terms before opening.

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