A worked example
A $10,000 deposit at 4.5% APY, compounded monthly over a 12-month term, matures to about $10,459 — roughly $459 in interest, guaranteed regardless of what happens to interest rates during the term.
Frequently asked questions
Why does compounding frequency matter for a CD?
More frequent compounding means interest starts earning its own interest sooner, which very slightly increases the maturity value compared to less frequent compounding at the same stated rate — the bank's quoted APY already accounts for this.
What happens if I withdraw before the CD matures?
Most CDs charge an early withdrawal penalty, commonly a forfeiture of several months' worth of interest — sometimes all the interest earned, depending on the term and the bank. Check your specific CD's terms before committing funds you might need early.
Is a CD better than a regular high-yield savings account?
A CD typically locks in a fixed rate for a fixed term, which protects you if rates fall but costs you flexibility and potential upside if rates rise. A savings account offers full access to your money but a rate that can change at any time.
This calculator provides estimates for general informational purposes only and is not financial advice.