How to use the CD calculator
The example is a $10,000 CD at 4% APY for 12 months. Replace it with the terms you were offered.
- Deposit and term. The list covers common terms from 3 months to 5 years.
- The rate. Choose whether your quote is an APY or an interest rate (APR). Bank rate tables almost always show the APY. If you enter an interest rate, also choose the compounding frequency from the account disclosure.
- Early withdrawal (optional). Choose “Withdraw early”, then enter the month you would cash out and the penalty from the CD’s terms, stated as months of interest.
The chart and table show the CD’s value over the term next to what you would receive by cashing out in each month (or quarter, for terms over a year).
How a CD’s value is calculated
From an interest rate: D × (1 + r ÷ n)n × m/12D is the deposit, APY the annual percentage yield, r the nominal annual rate as a decimal and n the number of compounding periods per year.
For an early withdrawal, the calculator subtracts the penalty from the interest earned so far:
Cash received = D + interest earned by month m − penalty
Effective yield = (Cash received ÷ D)12/m − 1p is the penalty in months of interest. The penalty is charged on the full deposit at the CD's rate, which is the most common US method.
A worked example
You put $10,000 into a CD for 12 months at 4% APY. At maturity it is worth $10,400.00, so it earns $400.00, about $33.33 a month.
Now suppose you need the money after 6 months and the penalty is 3 months of interest. By then the CD has earned $198.04. The penalty takes $98.53, so you receive $10,099.50: an annualized yield of 2.00% instead of 4%. Holding to maturity would have paid $300.50 more.
Cash out after only 2 months and the penalty is larger than the interest earned, so you get back $9,967.05, less than you deposited.
When an early withdrawal still makes sense
A penalty is a known cost, so it can be weighed against the alternative. If rates have risen sharply, breaking a CD and reinvesting at the higher rate can come out ahead when enough of the term remains to recover the penalty. In an emergency, the penalty is often cheaper than borrowing on a credit card. The “If you cash out” column shows the exact amount for every month, including the point where your principal is safe.
Penalties vary widely between banks, and longer CDs usually carry larger ones. Some “no-penalty” CDs charge nothing in exchange for a lower rate.
Longer terms, more interest, less flexibility
| Term at 4% APY | Value at maturity | Interest |
|---|---|---|
| 6 months | $10,198.04 | $198.04 |
| 12 months | $10,400.00 | $400.00 |
| 24 months | $10,816.00 | $816.00 |
| 60 months | $12,166.53 | $2,166.53 |
In practice longer CDs do not always pay a higher APY; when rates are expected to fall, banks may offer more on one-year CDs than on five-year ones. A common way to balance yield and access is a CD ladder: splitting the money across several terms, such as one to five years, so that one rung matures every year and can be spent or reinvested. The same idea applies to bonds; see the bond ladder calculator.
Deposit insurance
CDs at FDIC-insured banks are covered up to $250,000 per depositor, per insured bank, for each ownership category (such as individual, joint and certain retirement accounts), with accrued interest counted toward the limit. Credit union certificates have equivalent NCUA coverage. The calculator warns when a deposit exceeds the limit.
What this calculator does not include
- Taxes on the interest, which in the US are due each year as the interest is credited.
- Interest paid out rather than left in the CD. If you take interest monthly, it does not compound, and the total is slightly lower.
- Brokered CDs, which are sold at a market price instead of paying a penalty.
- Other penalty methods. Some banks charge the penalty only on the amount withdrawn.
- Bump-up, step-up and callable CDs, whose rate or term can change.