CD Calculator: Find the CD rate, interest your money is earning, total return, and compounding period with this certificate of deposit (CD) calculator. Daily, monthly, quarterly, semi-annually, and annual compounding of interest is permitted as well. You can also include periodic contributions (say, monthly deposits), taxable interest, and inflation-adjusted returns and withdrawals.
Calculation Results
Final Balance: $0.00
Initial Deposit: $0.00
Total Contributions: $0.00
Total Interest Earned: $0.00
Balance (Inflation Adjusted): $0.00
Total Tax Paid (Est.): $0.00
Disclaimer: Estimates based on inputs. Tax calculations simplified. Consult a financial advisor.
What is a certificate of deposit (CD)?
A certificate of deposit (CD) is an agreement to deposit money for some time in one go in return for interest payments. Term lengths are almost always 1 month to 5 years; however, they tend to be “every 3 months, 6 months, one year ( 12 months) and two years (24 months)” CDs. Most of the CDs pay compound interest. Interest is added to the principal, so you can earn more interest in the future, and the deposit does not need to be deposited again.
The most important part of the CD is the interest rate—a higher rate for the payer and all else equally advantageous to the holder.
While longer deposits will pay higher interest, the flip side of that is your money has to sit, and you expose yourself to an even greater inflation risk. The term “certificate of deposit” (CD) came from a time when paper certificates were delivered to signify that deposit agreement and the issuing of such are now very rare. Generally speaking, CDs pay higher interest than savings accounts and other bank depositors’ accounts, but that depends on the flexibility, of course, because some flexible deposits allow no or low penalty for early withdrawals. Remember that most CDs will charge large penalties for early withdrawal if you are forced to take money out quickly from the typical CD. This could leave a CD a worse investment than just a savings account in the eyes of many.
Using the certificate of deposit calculator
Our CD calculator will help in all your financial computations: effective CD interest rate, final money you will receive on a deposit at the end of its duration capital growth with a certificate of deposit-how much your money will actually get the final amount and the capital growth, inflation-adjusted the total of tax you have to pay on interest ( if any) Begin by entering your initial deposit amount, or just what you currently have saved. Next, provide the term of your deposit (usually in years, but we can also work with months, quarters, etc).
Enter Annual Interest Rate (APR), also called in deposit offers, and on bank product comparison sites. Keep in mind this is before compounding. Instead, our calculator will tell you the Annual Percentage Yield (APY) or Effective Annual Interest Rate; both the APR and APY are numbers that must leave expenses like the cost to maintain the deposit out. If the interest earned is taxable ( which is true for most U.S. deposits), enter your marginal tax rate applicable to the income.
Set the compounding period for the offer and CD agreement within the certificate of deposit (CD). If applicable, if you are planning on making a monthly/yearly contribution to the deposit, give the amount and instead/add monthly/yearly, etc.
Lastly, predict what percentage you think the average rate of inflation will be for the length of the CD term. Bear in mind that any large spikes from this will only impact the validity of ALL inflation-adjusted calculations, so take them as very, very approximate estimates.
The CD calculator will show you: ‘the total return on interest ( also called ‘CD earnings,’ ‘CD yield,’ or ‘CD savings’), the effective rate of interest (renamed Annual Percentage Yield, ‘ or ‘CD rate’), change in your principal amount in basis points, end of term deposit value and the total contribution or tax with /without penalty. You will also have numbers inflation adjusted if you input an inflation rate.
Why the compounding period matters
Compounding frequency, the time between when interest is compounded, is part of APY (Annual Percentage Yield) or APR and is usually the leading competing reason to compare nominal annual interest rates (APR) on its own. In general, when interest is compounding, the more often the effective rate is higher.
For example, a daily compounding (continuous Compounding) delivers a higher return than an annual compounding.
If you are in doubt about the methodology for dealing penny low, it is definitely annual Compounding, but to be safe, double-check with your bank.
CD return calculation example
For example, we want to calculate the accrued interest return from a $10,000 certificate of deposit (CD) at an annual rate of 2.5% over a two-year term.
To make calculations as easy as possible, we will say that the interest compounds annually, and there are no more contributions monthly or yearly. For the sake of this example, we will ignore all taxes on interest earned.
For the math, in year one, it is a no-brainer. At the end of year one, starting with a $10,000 principal and an interest rate of 2.5% means $250 in interest for a total of $10,250 at the end of year one. We Are doing Year Two, and the Compounding needs to be factored in. Year 1: Add $250 earned to the principal of $10,250, which is where we start. Using the same interest rate of 2.5%, the year two interest amount would equate to $10,250 x 0.025 or $256.25. After year two, yours would be a $10,556.25 deposit. ROI is just the difference from the initial deposit you took out, which is $556.25.
Return with inflation adjustment.
When thinking of any financial investment, a figure to bear in mind is the amount of inflation rate, usually indicated as a percentage. At the most basic view, inflation is what eats into the real return on a certificate of deposit (CD). If inflation eats through your CD interest rate, it’s actually costing you money, mainly eroding your purchasing power. Even if you are getting paid interest on a deposit, taxes can result in dollar-for-dollar negative real returns, too. Below is a chart with different inflation rates using the same 2% CD rate and 4% tax rate in all panels; the CD pays more than the inflation; however, the USD return is the same:
| Initial Deposit | Return (2y) | Final Value | Inflation Rate | Inflation-Adjusted Growth | Inflation-Adjusted Value |
|---|---|---|---|---|---|
| $10,000.00 | $387.69 | $10,387.69 | -1% | 5.925% | $10,592.53 |
| $10,000.00 | $387.69 | $10,387.69 | 0% | 3.877% | $10,387.69 |
| $10,000.00 | $387.69 | $10,387.69 | 1% | 1.848% | $10,184.85 |
| $10,000.00 | $387.69 | $10,387.69 | 2% | -0.160% | $9,984.01 |
| $10,000.00 | $387.69 | $10,387.69 | 3% | -2.148% | $9,785.17 |
| $10,000.00 | $387.69 | $10,387.69 | 4% | -4.117% | $9,588.33 |
Our calculator ran the computation. Even minimal inflation will have a large effect on the inflation-adjusted return and growth, as we can see from the numbers. At least when inflation equals the CD interest rate, returns are still slightly negative because of interest rate tax. That is true; you are pissed about the money you are losing real as you are paying taxes.
Financial caution
It’s not a bad nontechnical online tool to estimate the expected return (both on investment and capital growth) you get with a bank deposit, but this will not end the process of estimating that. When it comes to important financial decisions or agreements that are long-term, such as long-term bank deposits, etc., be careful again and read information given by software at your own risk.