A certificate of deposit is a savings product offered by banks and credit unions that pays a fixed interest rate in exchange for locking your money away for a set period, known as the term. Unlike a regular savings account, you agree not to touch the funds until the term ends — the maturity date — in return for a higher, guaranteed interest rate.
CDs can be opened with almost any amount, though most institutions set a minimum deposit. Because the rate and maturity date are fixed from day one, a CD is one of the most predictable ways to grow cash you don't need immediate access to.
Once you open a CD, your money is locked in for the agreed term — commonly anywhere from one month to five years or more. Interest accrues over that period based on the rate and compounding frequency you select, and is typically credited to your account monthly, quarterly, or annually depending on the bank's terms.
Because your money is tied up, CDs usually pay a better rate than a standard savings account. They are generally very low-risk, since deposits are commonly insured up to regulatory limits, but withdrawing early usually triggers a penalty, and returns are modest compared to investing in the stock market.
This calculator uses the standard compound interest formula to project your certificate of deposit's growth:
Interest earned is simply the final balance minus your initial deposit, and APY reflects the true annualized return once compounding is taken into account.
Enter your initial deposit. This is the amount of money you plan to invest in the CD.
Enter the interest rate. Use the published annual rate on the CD, not the APY.
Set the term. Enter the number of years and months until the CD matures.
Choose a compounding frequency. Select how often interest is compounded — the more frequent, the higher your final return.
Click Calculate. Your final balance, interest earned, and APY appear instantly.