CD Account Earnings Calculator
Estimate your Certificate of Deposit growth and total interest earnings.
How to Use the CD Calculator
A Certificate of Deposit (CD) is a type of savings account that holds a fixed amount of money for a fixed period of time, such as six months, one year, or five years. In exchange, the issuing bank pays interest. To use this calculator:
- Initial Deposit: Enter the amount of money you plan to put into the CD at the start.
- APY: Enter the Annual Percentage Yield offered by your bank. Unlike a simple interest rate, APY accounts for the effect of compounding within the year.
- Term: Specify how long your money will be locked in the account. Choose between months or years.
- Compounding: Select how often the bank calculates interest and adds it to your balance. Most modern high-yield CDs compound daily or monthly.
Understanding the CD Math
The calculator uses the standard compound interest formula to determine your future balance:
A = P (1 + r/n)^(nt)
Where:
- A: The final amount including interest.
- P: The principal (initial deposit).
- r: The annual interest rate (decimal).
- n: The number of times interest compounds per year.
- t: The time the money is invested (in years).
Why Choose a CD Account?
CDs are popular because they generally offer higher interest rates than standard savings accounts. They are FDIC-insured up to $250,000, making them one of the safest investment vehicles available. However, the trade-off is liquidity; if you need to withdraw your funds before the "maturity date," you will likely face an early withdrawal penalty, which could eat into your principal.
Example Calculation
If you deposit $10,000 into a 24-month CD with a 5.00% APY that compounds monthly, your result would look like this:
- Principal: $10,000
- Total Interest Earned: $1,049.41
- Final Balance: $11,049.41
This demonstrates how a fixed rate over a long period can provide a predictable and steady growth path for your savings compared to volatile markets.