How to use this calculator
This CD calculator with early withdrawal penalty shows what a CD earns, what you keep after taxes, and what happens if you cash out early. Here's what each input means:
- Deposit: the amount you put in on day one.
- APY: the annual percentage yield the bank quotes. Use the APY, not the "interest rate," if both are listed.
- Term: from 3 months to 5 years.
- Tax rate on interest: your federal plus state marginal rate. If you're in the 22% federal bracket in a no-tax state, enter 22%.
- Early withdrawal penalty: in months of interest. You'll find it in the account disclosure, often 3 months for a 1-year CD and 6 to 12 months for longer terms.
- Cash-out month: set this if you might break the CD. Leave it at 0 to hold to maturity.
- Comparison savings APY: a high-yield savings rate to compare against.
Results show interest earned, maturity value, after-tax interest, the APR equivalent, and your net if you withdraw early. If the penalty eats into your deposit, the calculator flags the principal loss. Bars compare the CD with the savings account over the same term.
How we calculate CD interest
We use the APY directly, because APY already reflects compounding:
interest = deposit × ((1 + APY)^(months ÷ 12) − 1)
early withdrawal penalty = deposit × APY × (penalty months ÷ 12)
The penalty uses simple interest at the CD rate. That's how most banks word it ("90 days of simple interest"). Your bank's exact method may differ slightly.
Worked example: You deposit $10,000 in a 12-month CD at 4.4% APY.
- Interest at maturity: $10,000 × 0.044 = $440. Maturity value: $10,440.
- After a 22% tax rate: $440 × 0.78 = $343.20.
- A 3-month penalty: $10,000 × 0.044 × 3 ÷ 12 = $110.
- Cash out at month 6: you've earned about $217.63. Minus the $110 penalty, you net $107.63.
- Cash out at month 2: you've earned about $72.02. The $110 penalty leaves you $37.98 short of your deposit.
That last case surprises people. An early withdrawal penalty is charged even if you haven't earned that much interest yet. It's the main way you can lose money in an insured CD.
APY vs APR on a CD
APY is the number to compare. It tells you what $1 grows to in one year with compounding included. APR is the simple yearly rate before compounding.
The calculator converts your APY to an APR equivalent, assuming daily compounding. A 4.4% APY works out to about 4.31% APR. If one bank quotes APR and another quotes APY, convert one so you're comparing the same thing.
Under federal Truth in Savings rules, banks must show APY on deposit accounts. So you'll usually see APY in the ad.
CD vs high-yield savings
The right choice depends on whether you might need the money. Here's how $10,000 compares over 12 months, before taxes:
| Account | Rate | Interest in 12 months | Access |
|---|---|---|---|
| 12-month CD | 4.4% APY | $440 | Penalty to withdraw early |
| High-yield savings | 4.0% APY | $400 | Withdraw anytime |
The CD earns $40 more here. But savings rates can change at any time, while the CD rate is fixed. If savings rates fall during the year, the CD's edge grows. If they rise, savings may pull ahead.
A common approach is to keep your emergency fund in savings and put money you won't touch for a set period in a CD. Our savings goal calculator can help you size each bucket.
Short vs long CD terms
Longer terms don't always pay more. When banks expect rates to fall, a 6-month or 1-year CD can pay as much as a 5-year CD, or more. Here's what $10,000 earns at a few rates, held to maturity:
| Term | APY | Interest earned | Typical penalty |
|---|---|---|---|
| 6 months | 4.4% | $217.63 | 3 months ($110) |
| 12 months | 4.4% | $440.00 | 3 months ($110) |
| 5 years | 4.0% | $2,166.53 | 12 months ($400) |
A 6-month CD keeps your options open. You can reinvest soon if rates rise. A 5-year CD locks in a rate even if rates drop, but breaking it costs more. Pick the term based on when you'll need the money, then shop for the best APY at that term.
How a CD ladder works
A CD ladder splits your money across several terms so some of it comes due regularly. For example, put $25,000 into five $5,000 CDs maturing in 1, 2, 3, 4 and 5 years. When each one matures, you can spend it or roll it into a new 5-year CD.
After a few years, every CD in the ladder earns a longer-term rate, and one matures each year. Ladders help with two problems:
- Access: you're never more than a year from some cash without a penalty.
- Rate risk: you don't have to guess where rates are headed. You reinvest a slice at a time.
Use this calculator on each rung to see its interest and maturity value.
Brokered CDs vs bank CDs
You can buy CDs directly from a bank or through a brokerage account. They work differently:
- Bank CDs are opened with the bank. Breaking one early costs the stated penalty.
- Brokered CDs are issued by banks but sold through brokers. Many have no early withdrawal option. To get out early, you sell on the secondary market. If rates have risen, you may get less than you paid.
Both are FDIC-insured up to the limits when the issuing bank is FDIC-insured. Check the issuing bank's name, not just the broker's. Some brokered CDs are "callable," meaning the bank can end them early, often when rates fall.
FDIC insurance and taxes
FDIC insurance covers $250,000 per depositor, per insured bank, per ownership category. Credit unions have similar coverage through the NCUA. If you hold more than $250,000, spreading money across banks or ownership categories can keep it all insured.
CD interest is taxable as ordinary income in the year it's credited, even if it stays in the CD. That's why the calculator shows after-tax interest. If you hold a multi-year CD, you typically owe tax each year on that year's interest.
A few habits help you get the most from a CD:
- Read the penalty terms before you open it.
- Note the maturity date. Many CDs roll over automatically into a new term at the current rate.
- Compare the after-tax result, not just the APY.
For longer-term growth with regular deposits, try the compound interest calculator.
Frequently asked questions
How much interest will a $10,000 CD earn in 12 months?
At 4.4% APY, a $10,000 12-month CD earns $440 if you hold it to maturity. At 4% APY it earns $400, and at 4.6% it earns $460. Because APY already includes compounding, a one-year CD simply pays deposit × APY.
Is CD interest taxable?
Yes. CD interest is taxed as ordinary income in the year it's credited to you, even if you leave it in the CD. Your bank sends Form 1099-INT when you earn $10 or more. CDs held inside an IRA follow the IRA's tax rules instead.
Is a CD better than a high-yield savings account?
A CD is often better when you know you won't need the money and the CD rate beats savings. Savings is better when you may need the cash, since you can withdraw anytime. Savings rates can also drop, while a CD locks in your rate for the whole term.
Can you lose money in a CD?
At an FDIC-insured bank, your principal is protected up to $250,000 per depositor, per bank, per ownership category. But an early withdrawal penalty can be larger than the interest you've earned, which takes money out of principal. Brokered CDs sold before maturity can also lose value if rates have risen.
What's the difference between APY and APR on a CD?
APR is the simple yearly rate. APY adds the effect of compounding, so it's slightly higher. A 4.4% APY CD compounded daily has an APR of about 4.31%. Compare CDs by APY, since that's what you actually earn over a year.
Is a 6-month CD worth it?
It can be if you want a short lock-up. At 4.4% APY, $10,000 earns about $217.63 in six months. Short CDs give you flexibility if rates rise, but you'll have to reinvest sooner if rates fall.
How do no-penalty CDs work?
A no-penalty CD lets you withdraw your full balance and interest after a short waiting period, often the first week, without a fee. The tradeoff is usually a lower rate than a regular CD of the same term. Most require you to take out the whole balance at once.
Sources
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Written and reviewed by SenseCalc Editorial Team
Calculator builders and personal finance writers
We build and test every SenseCalc calculator against official formulas and sources (IRS, CFPB, Federal Reserve, Freddie Mac), then explain the results in plain English.
Last reviewed October 26, 2026. How we build and check our calculators