CD Calculator

What is a certificate of deposit?

A certificate of deposit (CD) is a savings product in which you lock money away for a fixed term, from a few months to several years, in return for a fixed interest rate that is usually higher than a regular savings account pays. When the term ends, the CD matures and you receive your deposit plus the interest it earned.

The trade-off is access. Taking money out before maturity normally triggers a penalty, often a number of months of interest. In the United States, CDs held at banks are covered by FDIC deposit insurance, and those at credit unions by NCUA share insurance, up to $250,000 per depositor, per institution and per ownership category, which makes them a low-risk place for money you will not need soon.

How to use the CD calculator

• Initial deposit: the amount you place in the CD. It must be greater than zero.
• Time duration: the term, in years, half-years, quarters, months or days.
• Interest rate: the nominal yearly rate. If your bank quotes an APY instead, use the APY calculator to see the rate it implies.
• Compound frequency: how often interest is credited, from annually to daily.
• Contribution (optional): regular extra deposits, or negative amounts for withdrawals, and whether they go in at the start or the end of each period. Most ordinary CDs do not accept top-ups, so this is for add-on CDs or for comparing a savings plan.
• Tax rate (optional): the percentage of each period's interest that goes to tax.
• Inflation rate (optional): an expected inflation rate, used for the inflation-adjusted figures.

The results show the deposit value at maturity, the value after the inflation adjustment, the interest accrued, the effective interest rate, nominal and inflation-adjusted capital growth, total contributions and the tax figure.

How the figures are calculated

Interest is credited once per compounding period at the rate r ÷ n, where n is the number of periods per year. If a tax rate is entered, the tax is taken out of each period's interest, so only the after-tax interest compounds.

balance after each period = balance + balance × (r ÷ n) × (1 − tax rate)Without tax and contributions this is the standard A = P × (1 + r ÷ n)^{n × t}.

effective interest rate = (1 + r ÷ n × (1 − tax rate))ⁿ − 1

Some details worth knowing:

• Only complete compounding periods count. A 30-month term compounded annually earns interest for two periods.
• Contributions are converted to a yearly amount and divided evenly between the compounding periods.
• Total tax reports the tax withheld on the interest of the final compounding period, not the sum over the whole term.
• The inflation adjustment subtracts the inflation rate multiplied by the opening balance in every compounding period. With annual compounding that is ordinary yearly inflation. With monthly compounding, enter the monthly inflation rate (the annual figure divided by 12) to get a comparable result.

Why the compounding period matters

Here is $10,000 at a 4% nominal rate over five years, with no deposits, tax or inflation:

The difference between annual and daily compounding is $47.08 over five years. Compare CDs by their APY rather than by the nominal rate so that the compounding schedule is already built into the number.

CD return calculation example

Take a $10,000 CD at 4%, compounded monthly, with a 5-year term. The monthly rate is 0.04 ÷ 12 = 0.003333 over 60 periods, so the balance becomes 10,000 × (1.003333)⁶⁰ = $12,209.97. That is $2,209.97 of interest, a capital growth of 22.1%, and an effective rate of 4.074%.

Now add a 20% tax rate on the interest. The after-tax periodic rate is 0.003333 × 0.8 = 0.002667, which gives a final value of $11,732.61, interest of $1,732.61 and an effective rate of 3.247%. Tax cost you $477.36 of the interest over the term, and because the tax is taken each period, the lost interest also stops compounding.

Adding regular money changes the picture. Starting from $10,000 and adding $200 at the end of each month for three years at 4% compounded monthly ends at $18,909.03. You deposited $10,000 + 36 × $200 = $17,200, so the interest accrued is $1,709.03.

Return with inflation adjustment

A CD can pay interest and still lose buying power if prices rise faster than the balance grows. Suppose $10,000 earns 4.5% compounded annually for three years while inflation is 2.5%. The nominal value is 10,000 × 1.045³ = $11,411.66, a gain of 14.117%. Adjusted for inflation, the balance behaves as if it grew at 1.045 − 0.025 = 1.02 a year, which gives $10,612.08 and an inflation-adjusted capital growth of 6.121%.

If the inflation rate you enter is higher than the interest rate, the adjusted value ends below the starting deposit: the CD is losing real value even though the account balance is rising. That is a useful signal when you weigh a CD against other options. To project a longer horizon with regular deposits, try the compound interest calculator, and to see what a lump sum could be worth later, use the future value calculator.

These figures are estimates that assume a fixed rate and ignore early-withdrawal penalties, fees and your actual tax situation. They are not financial or tax advice. See the disclaimer.