How it works
APY vs. APR
APR (or nominal rate) is the simple annual rate before compounding. APY includes the effect of compounding within the year, so it is the number to compare between banks. The two are related by:
APY = (1 + APR/n)n − 1
where n is the number of compounding periods per year (365 daily, 12 monthly, 4 quarterly, 1 annually).
Value at maturity
A = P × (1 + APY)t = P × (1 + APR/n)n×t
with P the deposit and t the term in years (months ÷ 12). If you enter an APY, compounding frequency doesn't change the result — the APY already accounts for it — but the calculator shows the equivalent APR. If you enter an APR, more frequent compounding increases the yield.
Assumptions
- Interest stays in the CD and compounds until maturity; no withdrawals or early-withdrawal penalties.
- The optional tax rate is applied to total interest as a simple estimate; CD interest is generally taxed as ordinary income in the year it is credited.
Worked examples
$10,000 in a 12-month CD at 4.50% APY
Value at maturity: $10,450.00, so you earn $450.00. With daily compounding, a 4.50% APY is equivalent to a 4.402% APR.
$25,000 in a 5-year CD at 4.00% APR compounded monthly
APY: 4.074%. Value at maturity: $30,524.91; interest earned $5,524.91 (about $4,309.43 after a 22% tax rate).
How compounding frequency matters
For a $25,000 CD at a 4.00% APR over 5 years, annual compounding grows to $30,416.32, monthly to $30,524.91 and daily to $30,534.73. The difference is real but small — the rate and term matter far more.
Choosing a CD
- Compare APYs, not APRs, across banks and credit unions.
- Match the term to when you need the money. Early-withdrawal penalties often equal several months of interest.
- Consider a CD ladder — splitting money across CDs that mature at different times gives regular access to cash while capturing longer-term rates.
- Check insurance. Deposits at FDIC-insured banks and NCUA-insured credit unions are generally insured up to $250,000 per depositor, per institution, per ownership category.
- Mind inflation and taxes. A CD's real return is roughly its after-tax yield minus inflation — see the inflation calculator.
- Compare alternatives such as high-yield savings, Treasury bills and money market funds, which may offer more flexibility.
Reading your results
Value at maturity is what the CD will be worth on the day it matures if you leave all interest in the account. Interest earned is that value minus your deposit. The calculator also reports both the APY and the equivalent APR so you can compare offers that are quoted differently. If you enter a tax rate, the after-tax interest gives a rough sense of what you keep.
Types of CDs
- Traditional CDs lock in a fixed rate for a set term, from a few months to five years or more.
- No-penalty CDs let you withdraw early without a fee, usually in exchange for a slightly lower rate.
- Bump-up or step-up CDs allow one or more rate increases during the term if the bank raises rates.
- Brokered CDs are bought through a brokerage and can be sold before maturity on a secondary market, though their price can fall if rates rise.
- Jumbo CDs require a larger minimum deposit, sometimes for a higher rate.
What happens at maturity
Many CDs automatically renew into a new CD of the same term at the bank’s then-current rate if you do nothing during a short grace period, often 7–10 days. Put the maturity date on your calendar so you can compare rates and decide whether to renew, move the money or withdraw it.
Frequently asked questions
What is the difference between APY and APR on a CD?
APR is the annual rate before compounding; APY includes compounding and shows what you actually earn in a year. Banks typically advertise APY for deposits.
How is CD interest calculated?
Value = deposit × (1 + APY) raised to the number of years. Equivalently, deposit × (1 + APR/n) raised to n × years, where n is the compounding frequency.
Does daily compounding make a big difference?
Only slightly. At 4% APR, daily compounding gives an APY of about 4.081%, compared with 4.074% for monthly.
Is CD interest taxable?
Generally yes, as ordinary income in the year it is credited to your account, even if you do not withdraw it — unless the CD is held in a tax-advantaged account such as an IRA.
What happens if I withdraw early?
Most CDs charge an early-withdrawal penalty, often several months of interest. This calculator assumes the CD is held to maturity.
Are CDs safe?
CDs at FDIC-insured banks or NCUA-insured credit unions are generally insured up to $250,000 per depositor, per institution, per ownership category.
Should I choose a longer CD for a higher rate?
Longer CDs often pay more, but your money is locked up longer and you could miss out if rates rise. A CD ladder balances higher yields with regular access to your money.