What Is a CD Calculator?
A Certificate of Deposit (CD) is a savings product offered by banks and credit unions that pays a fixed interest rate over a set term in exchange for keeping your money deposited until maturity. This CD calculator shows how much your deposit will grow, how much interest you'll earn, and the effective annual percentage yield (APY) based on how often interest compounds.
How to Use It
Enter your initial deposit, the advertised annual interest rate (APR), the term length in years, and how frequently the interest compounds (monthly, quarterly, annually, etc.). The calculator instantly returns your balance at maturity, the total interest earned, and the true effective APY.
The Formula Explained
The maturity value uses the standard compound interest formula \(A = P\left(1 + \frac{r}{n}\right)^{n \cdot t}\), where \(A\) is the final amount, \(P\) is the principal (initial deposit), \(r\) is the annual rate as a decimal, \(n\) is the number of compounding periods per year, and \(t\) is the number of years.
$$A = P \left(1 + \frac{r}{n}\right)^{n \cdot t}$$More frequent compounding produces a slightly higher effective yield even at the same nominal rate.
Worked Example
Suppose you deposit $10,000 into a 2-year CD paying 5% APR, compounded monthly. Here \(n = 12\) and \(t = 2\), so
$$A = 10{,}000 \times \left(1 + \frac{0.05}{12}\right)^{24} \approx \$11{,}049.41$$You earn about $1,049.41 in interest, and the effective APY is roughly 5.116%.
FAQ
Is APR the same as APY? No. APR is the nominal annual rate. APY (annual percentage yield) accounts for compounding and is always equal to or higher than APR.
What happens if I withdraw early? Most CDs charge an early-withdrawal penalty, often several months of interest. This calculator assumes you hold the CD to maturity.
How is a CD different from a savings account? A CD locks in a fixed rate for a fixed term, while a savings account has a variable rate and lets you withdraw anytime. CDs typically offer higher rates in exchange for that commitment.
