CD Calculator

What is a Certificate of Deposit (CD)?

A CD is a time deposit offered by banks and credit unions. You agree to lock up your money for a fixed term (typically 6 months to 5 years), and in exchange, the bank pays you a guaranteed interest rate — usually higher than a regular savings account. Withdraw early, and you'll typically pay a penalty of 3–12 months of interest.

How CD interest is calculated

Banks usually quote CDs in APY (Annual Percentage Yield), which already includes the effect of compounding. Most CDs compound daily. For example, a $10,000 CD at 5% APY for 1 year with daily compounding grows to $10,512.67 — slightly more than the simple $500 you'd get from 5% simple interest.

Final Value = Principal × (1 + APY/365)^{365 × years}

CD rates (2026 landscape)

• 6-month CD: 4.5–5.0% APY
• 1-year CD: 4.7–5.3% APY (often the sweet spot)
• 3-year CD: 4.0–4.5% APY
• 5-year CD: 3.8–4.3% APY

Note the "inverted curve" — shorter terms often pay more than longer terms. This happens when markets expect interest rates to fall. Online banks and credit unions typically offer the best CD rates, far better than big national banks.

When a CD makes sense

• You have a known future expense (down payment, tuition) and won't need the money before maturity
• You want a guaranteed return with zero market risk
• Rates are high and you want to lock them in long-term
• You've maxed out tax-advantaged accounts (401k, IRA) and need a stable cash holding

CD ladders

A "CD ladder" splits your money across CDs of different maturities (e.g., 1, 2, 3, 4, 5-year CDs). As each matures, you reinvest into a new 5-year CD. This gives you regular access to cash while capturing the higher long-term rates — a popular strategy for conservative savers.