How do I calculate CD interest?
For a one-year CD, multiply your deposit by the APY: $10,000 at 4% APY earns $400. For other terms, grow the deposit by one plus the APY for each year, then subtract what you put in. That same $10,000 earns $198.04 in 6 months and $2,166.53 in 5 years.
Interest = deposit × ((1 + APY)months ÷ 12 − 1)
The APY already includes compounding, so you don’t need to know whether the bank compounds daily or monthly. This is the APY formula banks must use under the federal Truth in Savings rules, turned around to give the interest instead of the rate.
“How much does a $10,000 CD make in 1 year?”
$400 at 4% APY, for $10,400 at maturity. Try this scenario
“How much will $10,000 make in a 6-month CD?”
$198.04 at 4% APY. Six months earns a little less than half a year’s interest, because the interest has less time to compound. Try this scenario
How much does a CD earn?
At 4% APY, a $10,000 CD earns about $198 in 6 months, $400 in a year, $1,249 in 3 years and $2,167 in 5 years. Interest grows in step with the deposit, so $100,000 earns ten times as much. Rates change often, so use the APY your bank quotes today.
Interest earned at 4% APY:
| Deposit | 6 months | 1 year | 3 years | 5 years |
|---|---|---|---|---|
| $10,000 | $198 | $400 | $1,249 | $2,167 |
| $25,000 | $495 | $1,000 | $3,122 | $5,416 |
| $50,000 | $990 | $2,000 | $6,243 | $10,833 |
| $100,000 | $1,980 | $4,000 | $12,486 | $21,665 |
“How much interest will a $100,000 CD earn in a year?”
$4,000 at 4% APY, or about $333 a month. Try this scenario
“How much would I earn if I put $500 in a CD for 5 years?”
$108.33 at 4% APY, for $608.33 at the end. Try this scenario
APY vs. interest rate: what’s the difference?
The interest rate, sometimes called the APR, is the rate before compounding. The APY is what you actually earn in a year once interest starts earning interest. A 4% rate compounded daily works out to a 4.08% APY. Compare CDs by APY: banks must show it, and it already counts compounding. The APY calculator converts between the two for any compounding.
If your bank quotes a rate rather than an APY, set Rate type to Interest rate (APR) and choose how often it compounds.
“My bank quotes 4% interest compounded daily on $10,000 for a year. What do I earn?”
$408.08, because 4% compounded daily is a 4.08% APY. Try this scenario
What’s the penalty for withdrawing early?
Banks set their own penalties, usually a set number of months of interest: often about three months on short CDs and six to twelve months or more on longer ones. Federal rules require at least seven days’ interest on money taken out in the first six days. Check your account agreement for the exact terms.
Cash out early enough and the penalty can be bigger than the interest you’ve earned, with the rest taken from your deposit. Enter the month under More options to see what you’d walk away with.
“I have $10,000 in a 2-year CD at 4% APY with a 6-month penalty. What if I cash out after 9 months?”
You’d keep $102.41 of the $298.52 you’d earned, after a $196.11 penalty. Try this scenario
Is a CD worth it?
A CD locks in a rate, which pays off if rates fall, and it’s insured up to $250,000 per depositor, per bank, per ownership category. The trade-off is access: a high-yield savings account pays a variable rate but lets you withdraw any time. Either way, tax and inflation take a share of the interest.
Take $10,000 at 4% APY for a year. At a 22% tax rate you keep $312, and with 3% inflation that leaves you about $12 ahead in buying power. CDs protect money you’ll need soon; they rarely grow it much. For longer goals, compare the compound interest calculator at a higher expected return.
CD FAQ
Are CDs FDIC insured?
Yes, at FDIC-insured banks, up to $250,000 per depositor, per bank, per ownership category, and credit union CDs have the same coverage from the NCUA. Your CDs, checking and savings at one bank count toward the same limit, so spread larger amounts across banks or account types.
Is CD interest taxable?
Yes. CD interest is taxed as ordinary income, and your bank reports it on Form 1099-INT. It’s generally taxable in the year it’s credited to your account, even if you leave it in the CD until maturity. CDs held in an IRA are taxed under the IRA’s rules instead.
What happens when my CD matures?
You get a short grace period, often 7 to 10 days, to withdraw the money or move it without a penalty. If you do nothing, many CDs renew automatically for the same term at whatever rate the bank pays then, which may be lower, so mark the maturity date.
Is it worth putting $10,000 in a CD?
It can be, for money you won’t need before the term ends. At 4% APY, $10,000 earns $400 in a year, guaranteed and insured. If you might need the cash sooner, a high-yield savings account pays a similar but variable rate and lets you withdraw any time without a penalty.
The formulas are on the methodology page.
Sources
- Consumer Financial Protection Bureau, Regulation DD (Truth in Savings), Appendix A: Annual Percentage Yield Calculation.
- 12 CFR 204.2(c), Regulation D: the minimum early withdrawal penalty on time deposits.
- FDIC, Deposit Insurance at a Glance.
- IRS, Topic no. 403: Interest received.