CD Calculator
Enter your deposit amount, interest rate, term and compounding frequency to see your final CD balance, total interest earned, and the effective annual yield (APY). A month-by-month schedule shows exactly how your balance grows. You can also factor in your marginal tax rate to get your after-tax return.
What is a Certificate of Deposit?
A Certificate of Deposit (CD) is a time-deposit account offered by banks and credit unions. You agree to leave a fixed sum of money on deposit for a set term - typically three months to five years - and in return the institution pays a fixed interest rate that is usually higher than a standard savings account. At maturity you receive your principal back plus all accrued interest. If you withdraw early, most CDs charge a penalty equal to a few months of interest. Because they are insured by the FDIC (banks) or NCUA (credit unions) up to $250,000 per depositor, CDs carry virtually no credit risk.
How this calculator works
Enter your initial deposit, the stated annual interest rate, the length of the CD term in years and months, and how often interest compounds. The calculator applies the compound interest formula A = P(1 + r/n)^(nt), where P is the principal, r is the annual rate, n is the number of compounding periods per year, and t is time in years. It also converts the nominal rate to the effective Annual Percentage Yield (APY) so you can compare CDs with different compounding frequencies on an equal footing. If you enter a marginal tax rate, it subtracts the estimated income tax on your interest to show your real after-tax gain.
Compounding frequency and APY
Most CDs compound interest monthly, but some compound daily, quarterly, semi-annually, or annually. The more frequently interest compounds, the slightly higher your effective return. The APY captures this: a 5% rate compounded monthly gives an APY of 5.116%, while the same 5% compounded annually gives an APY of exactly 5%. When comparing CD offers from different banks, always compare APY rather than the nominal rate to know which one genuinely pays more.
CD laddering strategy
A CD ladder splits your total deposit across several CDs with staggered maturity dates - for example, one-quarter each in 6-month, 12-month, 18-month and 24-month CDs. When the shortest CD matures, you reinvest it at the longest term. This gives you access to a portion of your money every few months while still earning near-long-term rates. Laddering also reduces interest-rate risk: if rates rise, you capture higher yields as each rung matures instead of being locked into a single low rate for years.
Taxes on CD interest
Interest earned on a CD is taxed as ordinary income at the federal level, and most states tax it too. Crucially, the IRS requires you to report and pay tax on the interest each year as it accrues, even if the CD has not yet matured and you have not received the cash - this is the original-issue discount (OID) rule for multi-year CDs. Use the optional tax rate field to see your estimated after-tax return, and consult a tax advisor for your exact situation. CDs held inside a traditional IRA or Roth IRA grow tax-deferred or tax-free respectively.
Typical CD rate tiers by term (national averages, 2025)
| Term | National avg APY | Top online bank APY (approx) |
|---|---|---|
| 3 months | 1.50% | 4.50-5.00% |
| 6 months | 1.80% | 4.80-5.25% |
| 1 year | 1.90% | 4.75-5.15% |
| 18 months | 1.70% | 4.50-4.90% |
| 2 years | 1.60% | 4.25-4.75% |
| 3 years | 1.40% | 4.00-4.50% |
| 5 years | 1.30% | 3.75-4.25% |
Rates vary widely by institution. Online banks and credit unions frequently beat these averages.
Frequently asked questions
What is the difference between the interest rate and the APY on a CD?
The interest rate (or nominal rate) is the stated percentage the bank pays before compounding is taken into account. The APY (Annual Percentage Yield) is the effective annual return after compounding is included. For a CD that compounds monthly at a 5% nominal rate, the APY is about 5.116%. When comparing CDs across institutions, use APY - it is the true apples-to-apples measure of what you will earn per year.
What happens if I withdraw from a CD early?
Almost every CD charges an early-withdrawal penalty, typically expressed as a set number of months of interest (for example, 3 months of interest for a 1-year CD, 6 months for a 5-year CD). In extreme cases - if you withdraw very early on a long-term CD - the penalty can eat into your principal. Some banks offer "no-penalty" or "liquid" CDs that allow one penalty-free withdrawal, but they usually pay a lower rate. Always check the penalty terms before opening a CD.
How are CDs taxed?
CD interest is taxed as ordinary income at both the federal and (usually) state level. For CDs that mature within the calendar year, you report the interest when you receive it. For multi-year CDs, the IRS applies original-issue discount rules: you must report and pay tax on the interest each year as it accrues, even before you actually receive the cash at maturity. Your bank will send a Form 1099-INT (or 1099-OID) each year showing the taxable amount. CDs inside a traditional IRA defer taxes until withdrawal; inside a Roth IRA the interest is tax-free.
What is a CD ladder and why should I consider one?
A CD ladder is a strategy where you split your deposit across multiple CDs with different maturity dates - for example, dividing $20,000 into four $5,000 CDs maturing in 6, 12, 18 and 24 months. When each CD matures you roll it into a new longer-term CD. Laddering balances yield (longer terms generally pay more) with liquidity (you always have money maturing soon), and it reduces the risk of being locked into a low rate if interest rates rise.
Are CDs safe?
Yes, within the insurance limits. CDs at FDIC-insured banks are covered up to $250,000 per depositor, per institution, per account category. CDs at NCUA-insured credit unions carry the same protection. As long as your total deposits at one institution stay under the limit, you face essentially no credit risk - even if the bank fails. Above $250,000, you can spread funds across multiple institutions to maintain full coverage.
Can I add money to a CD after opening it?
Standard CDs are single-deposit accounts: you put in the initial amount and cannot add more until the CD matures. However, "add-on CDs" - offered by some credit unions and online banks - allow additional deposits during the term. These are less common and often pay slightly lower rates.
What is a bump-up or step-up CD?
A bump-up CD lets you request a rate increase - usually once during the term - if the bank raises its published rate after you open the account. A step-up CD automatically increases the rate on a preset schedule (for example, every 6 months). Both types provide some protection if rates rise, but they typically start at a lower rate than a standard fixed-rate CD.