Short answer: CD balance at maturity = deposit × (1 + APY)years. A $10,000 CD at 4.00% APY earns $400 in one year and $2,167 over five years. Compare CDs by APY, not the base rate.
Interest on a $10,000 CD
| APY | 6 months | 1 year | 2 years | 5 years |
|---|
| 3.50% | $173.49 | $350.00 | $712.25 | $1,876.86 |
| 4.00% | $198.04 | $400.00 | $816.00 | $2,166.53 |
| 4.50% | $222.52 | $450.00 | $920.25 | $2,461.82 |
Assumes interest stays in the CD until maturity. If your bank pays interest out monthly instead, you'll earn slightly less, because it stops compounding.
Choosing a CD term
A longer CD locks in today's APY, which helps if rates fall and hurts if they rise. Before you lock money away for years, compare the APY against a high-yield savings account you can withdraw from any time: if the gap is small, flexibility is usually worth more. Our savings interest calculator shows the savings side.
A CD ladder splits money across several terms, say 1, 2 and 3 years, so part of it matures every year. You keep some access to cash while still getting longer-term rates on the rest.
Remember that CD interest is generally taxable as ordinary income in the year it's credited, even before the CD matures. For a deeper look at how APY works, see what is APY and what is a good APY.
Frequently asked questions
How much interest will a $10,000 CD earn?
At 4.00% APY, a $10,000 CD earns about $198 in 6 months, $400 in 12 months, $816 in 2 years and $2,167 in 5 years, assuming the interest stays in the CD and compounds.
How is CD interest calculated?
Banks quote APY, which already includes compounding. Your balance at maturity = deposit × (1 + APY)years. For a term shorter than a year, years is a fraction: 6 months is 0.5.
What's the difference between APY and the interest rate on a CD?
The interest rate (APR) is the base rate; APY adds the effect of compounding over a year, so it's slightly higher whenever interest compounds more than once a year. Compare CDs by APY. If you only have a rate and compounding frequency, tick the box in the calculator to convert it.
What happens if I withdraw from a CD early?
Most banks charge a penalty measured in months of interest, often a few months for a one-year CD and more for longer terms. On a $10,000 CD at 4% APY, a 3-month penalty is about $99. Check your bank's terms, since penalties vary widely.
Are CDs safe?
CDs at FDIC-insured banks, or NCUA-insured credit unions, are insured up to $250,000 per depositor, per institution, per ownership category. Above that, spread money across banks or account types.
Disclaimer: Estimates for planning only, not financial or tax advice. Confirm APY, compounding and penalty terms with your bank.