$50,000 CD at 2% APY
Growth projection over a 3-year term, compounded monthly. Use the calculator below to change the term or compounding frequency.
End Balance at Maturity
$53,089.18
Example
A $50,000 CD at 2% APY compounded monthly for 3 years grows to $53,089.18, earning $3,089.18 in interest.
Total Interest Earned
$3,089.18
Effective APY
2.018%
Deposit vs. interest earned
- Initial Deposit: $50,000
- Interest Earned: $3,089.18
What Is a Certificate of Deposit?
A certificate of deposit (CD) is an agreement to deposit money with a bank or credit union for a fixed period — commonly three months to five years — in exchange for a fixed interest rate that's usually higher than a regular savings account. In return for the higher rate, you generally can't withdraw the money before maturity without an early-withdrawal penalty.
CDs issued by FDIC-member banks are insured up to $250,000 per depositor, per institution, making them one of the lowest-risk places to grow cash you won't need until a known future date.
Balance growth over the CD's term
Year-by-Year Accumulation Schedule
| Year | Interest Earned | Ending Balance |
|---|---|---|
| 1 | $1,009.22 | $51,009.22 |
| 2 | $1,029.59 | $52,038.81 |
| 3 | $1,050.37 | $53,089.18 |
How Is CD Growth Calculated?
A CD grows using standard compound interest: A = P(1 + r/n)^(nt) for discrete
compounding frequencies, or A = Pe^(rt) for continuous compounding, where
P is the deposit, r the annual rate, n the compounding periods per
year, and t the term in years.
APY vs. APR
APY (annual percentage yield) reflects the actual return after compounding is applied, while APR is the simple annualized rate before compounding. Banks are required to advertise APY for CDs so consumers can compare products fairly regardless of each bank's compounding schedule.
Types of CDs
Beyond the traditional fixed-rate CD, banks offer bump-up CDs (one-time rate increase if rates rise), liquid CDs (penalty-free early withdrawal at a lower rate), zero-coupon CDs (bought at a discount, paid at face value), and callable CDs (the bank can redeem early if rates fall).
CD Alternatives
Money market accounts offer similar safety with more liquidity but typically lower guaranteed rates; short-term bonds and treasury bills can offer competitive yields with different tax treatment; and simply paying down high-interest debt often "earns" a better guaranteed return than any CD if you're carrying a balance above the CD's rate.
Example — Your Current Inputs
A $50,000 CD at 2% APY compounded monthly for 3 years grows to $53,089.18, earning $3,089.18 in interest.
Additional Example — Short-Term CD
A $10,000 CD at 4% APY compounded monthly for exactly 1 year grows to about $10,407.42, earning $407.42 in interest — noticeably more than the $400 a simple (non-compounding) calculation would suggest.
About These Parameters
- Initial Deposit & Interest Rate
- The lump sum you're depositing and the APY quoted by the bank for the CD's term — most CDs don't accept additional deposits after opening.
- Compounding & Term
- How often interest is credited, and how long the money is locked in before maturity. Longer terms and more frequent compounding both increase the end balance.
- Marginal Tax Rate
- CD interest is taxed as ordinary income in the year it's credited, even if the CD hasn't matured yet. Enter your marginal federal (plus state, if applicable) rate to estimate the after-tax return.
Frequently Asked Questions
What happens if I withdraw early?
Most CDs charge an early-withdrawal penalty, commonly a few months' worth of interest, which can eat into or even exceed the interest earned if withdrawn shortly after opening.
Is my CD's interest guaranteed?
Yes — a fixed-rate CD's rate is locked for the full term, unlike a savings account rate, which the bank can change at any time.
Why did CD rates historically reach 15-20%?
During the high-inflation period of the late 1970s and early 1980s, the Federal Reserve pushed short-term rates sharply higher to control inflation, and CD rates followed. Rates have been far lower — often under 1% — during more recent low-inflation, low-rate periods.