The CD formula
Balance at maturity = Deposit × (1 + APY)months / 12. Interest earned is the balance minus the deposit. If you only know the interest rate r and the compounding frequency n, first convert it: APY = (1 + r / n)n − 1.
Example: $10,000 CD at 4.5% APY
| Term | Balance at maturity | Interest earned |
|---|
| 3 months | $10,110.65 | $110.65 |
| 6 months | $10,222.52 | $222.52 |
| 12 months | $10,450.00 | $450.00 |
| 18 months | $10,682.54 | $682.54 |
| 24 months | $10,920.25 | $920.25 |
| 36 months | $11,411.66 | $1,411.66 |
| 60 months | $12,461.82 | $2,461.82 |
A 4.5% APY corresponds to an interest rate of about 4.402% compounded daily, or 4.41% compounded monthly.
Interest on a $10,000 CD by APY and term
| APY | 6 months | 1 year | 2 years | 5 years |
|---|
| 3% | $148.89 | $300.00 | $609.00 | $1,592.74 |
| 4% | $198.04 | $400.00 | $816.00 | $2,166.53 |
| 4.5% | $222.52 | $450.00 | $920.25 | $2,461.82 |
| 5% | $246.95 | $500.00 | $1,025.00 | $2,762.82 |
How to compare CDs
Compare by APY rather than by rate, check the term matches when you will need the money, and look at the early-withdrawal penalty. If you might need part of the money sooner, a CD ladder (splitting the deposit across 1-, 2- and 3-year CDs) or a high-yield savings account keeps more of it within reach.
Frequently asked questions
How is CD interest calculated?
With the APY, the balance at maturity is Deposit × (1 + APY)^(months / 12). With an interest rate r compounded n times a year, it is Deposit × (1 + r / n)^(n × years). A $10,000 one-year CD at 4.5% APY is worth $10,450 at maturity.
What is the difference between a CD rate and a CD APY?
The rate (APR) is the interest rate before compounding; the APY includes compounding over a year. A 4.4% rate compounded daily is an APY of about 4.498%. Compare CDs by APY, because it already accounts for how often interest compounds.
Does compounding frequency matter for a CD?
Only when you start from the interest rate. If the bank quotes an APY, compounding is already built in, so a daily-compounded and a monthly-compounded CD with the same APY earn the same amount over a full year.
How much does a $10,000 CD earn in a year?
At 4% APY it earns $400, at 4.5% APY $450 and at 5% APY $500 over 12 months, as long as the interest stays in the CD until maturity.
What happens if I withdraw money from a CD early?
Most banks charge an early-withdrawal penalty, commonly a few months of interest (for example 3 months of interest on a 1-year CD). The penalty can reduce your return below what this calculator shows, and on short terms it can take some of your principal.
Is CD interest taxable?
In the US, CD interest is taxed as ordinary income in the year it is credited to your account, even if you do not withdraw it until maturity. CDs held inside an IRA follow the IRA rules instead.