CD Calculator

Use our free certificate of deposit calculator to see your CD's maturity value, total interest earned, APY impact & tax-adjusted returns.

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Certificates of Deposit (CDs): Safe, Steady Savings

If you're worried about the volatile fluctuations of the stock market, you are not alone. For many individuals, their preference is to accumulate savings without the constant stress of monitoring stock market price volatility every day. This is where a Certificate of Deposit (CD) can be beneficial.
Why Timing Matters

Entering into 2026, the market is being affected by the end of the Federal Reserve's monetary policy of reducing interest rates during the year 2025. In addition to the current CD yield ranges of 3.75%-4.25% annual percentage yield (APY), most CD rates are significantly less than the 5% yields previously available during the previous years of 'easy money' (i.e., as a result of lower federal funds rates). Although 3.75%-4.25% may seem low compared to those rates from last year, this is a good opportunity for investors who want to secure CD principal at higher than traditional savings account rates of close to zero percent. Now is the time to lock in that rate with a CD so that you avoid potential future losses due to continued declines in rates over the course of the rest of the year.
Definition of a CD

CDs act as a contract between you and the bank whereby you provide the bank with an amount of money for a set period (referred to as the "term") in return for a higher interest rate than you receive in a regular bank account.
The Conditions: In general, terms are as short as three months or may extend as long as five years.

The Pitfall: If you withdraw your cash too soon, you risk paying an "Early Withdrawal Fee," which reduces the amount of interest earned. It is a promise to support yourself financially after you retire.

What Is a Certificate of Deposit (CD)?

A Certificate of Deposit (CD) is a type of time deposit that credit unions and banks use as a means of saving money over time. You will deposit a sum of money (the amount you deposit) for a specific period of time (the term), generally from 1 month to 10 years. Against the amount you deposit into an account, the credit union or bank agrees to pay you interest at a guaranteed fixed rate, which is generally greater than what would be paid by a regular savings account.

The downside of CDs is that your money is "locked" until the maturity date of your CD. Withdrawing your money before the maturity date will generally lead to a penalty (such as losing up to several month's worth of interest). When your CD matures, you'll receive your initial deposit amount back and any interest you earned.

Because CDs are typically protected by either FDIC insurance (for banks) or NCUA insurance (for credit unions) up to $250,000 for each depositor in each ownership category, they are considered one of the safest places to put cash. If your bank were to fail, you'd still have your money protected.

In December 2025, the Federal Reserve has lowered the funds rate to between 3.50%-3.75%, and several of the best online banks and credit unions are still offering competitive benchmark yields above 4% APY on many of their shorter-term CDs, making CDs a good choice for anyone wanting to gain predictable income without the risk of the stock market.

A Brief History of Certificates of Deposit

In the western world, many banks in Europe were the first to offer Certificates of Deposit (CD) products in the 1600's. They were created to encourage savings and to create a paper trail for depositors.

In the U.S., the first digital CDs appeared in the early 1800s and were typically printed on decorative stationery providing customers with some level of assurance in the ability of the institution holding their deposits to return their money. During the 1950s and 1960s, the modern version of the CD (negotiable CD) was developed, culminating in the first negotiable CDs issued by First National City Bank (now Citibank) in 1961. The issuance of the negotiable CD provided significant benefits to institutional investors, as they were now able to buy and sell these large denomination CDs (greater than $100,000) through secondary markets. This transaction gave added liquidity to the large deposit marketplace.

The introduction of federally insured deposits (FDIC) also contributed to the confidence of retail, or individual, investors in CDs. They were able to purchase CDs with a great degree of security, and thus entered the marketplace more comfortably than they could have had there been no deposit insurance available.

As the banking industry has moved forward, bank products have been converted to digital formats. Due to their much lower operating costs (overheads), digital banks (mainly online) currently offer the highest overall returns on CDs.

How to Buy CDs

There are three world-famous methods to purchase CDs.

Directly through credit unions and banks. Your best choice would be to buy a CD directly from the credit union or bank you are interested in. You will be able to compare multiple financial institutions' rates and terms. For example, Bank of America and Wells Fargo offer CDs with different interest rates. Usually credit unions will offer better terms compared to other financial institutions.

Using Online Banks. Some online banks provide you with the ability to open an account with just your Social Security number and a bank statement; this is much easier than having to go through a traditional bank and wait for a monthly statement in order to close your account. Additionally, the online banking platform allows you to manage all aspects of your account via a computer or mobile device.

Brokered CDs. You can purchase CDs offered by banks through stockbrokers or online brokerage firms. They generally provide you with higher interest rates than the other types of purchases listed above due to competing with more than one bank and paying a commission to brokers for selling these products. However, brokered CDs do carry risks associated with price fluctuations and require some understanding of how the market works.

In order to make your purchase, do the following:

Use Bankrate or NerdWallet to compare rates and find the best current rate.
Select a term and minimum deposit amount (certainly between $500 and $1,000, although some banks will allow deposits of lesser amounts).
You can open an account online or go into the bank in person.
Fund your account via electronic transfer, bank check, or wire.
Once you open your account, the money will be available to you upon maturity, but there are strategies that you can implement before that if you so choose.
Finally, always check the amount of your account is FDIC/NCUA insured and take note of any early withdrawal penalties.

Types of CDs

In 2025, there are several different types of CDs available, all of which are intended to meet the varying needs of investors:
Fixed and Traditional Rate CDs - are also known as "the typical" and have a fixed rate, fixed term, and pre-determined penalties for early withdrawal.
High-Yield CDs - will typically offer higher annual percentage yield (APY) percentages, generally over 4% for shorter-term CDs, and may only be available from Online Banks.
Jumbo CDs - are for depositors that have larger amounts of funds (a minimum of $100,000) and typically offer higher rates to larger savers and institutional depositors.
No-Penalty CDs - have a specified minimum period of time after which you are permitted to withdraw your deposit without facing any penalties. They provide you with the greatest amount of flexibility in terms of accessing your funds.
Bump Up CD - allow you to ask for an increase in your rate (or rates) at any time, as long as you are still in possession of the account.
Step Up CD - are set up to provide you with periodic increases in interest rates.
Liquid or Callable CDs - have many characteristics in common with Liquid CDs, but they also include the element of allowing you to withdraw funds from your CD prior to maturity date if desired.

How to Use CDs Effectively: Smart Strategies

Using CDs (certificates of deposit) strategically can help you take advantage of the benefits of CDs in a fluctuating interest rate environment. The most common way to maximize CD performance is through CD laddering. The idea behind CD laddering is to divide your money into multiple CDs with staggered maturity dates (e.g. one CD with a 6-month maturity, one with a 1-year maturity, one with a 2-year maturity, etc.). This allows you to have access to cash when you need it and also take advantage of possibly higher long-term interest rates when they become available in the future.
In addition to CD laddering, there are other ways to use CDs:
Barbell Strategy: You split your investments between two extremes; short-term CDs for tight cashflow needs and long-term CDs for maximum yield.
Bullet Strategy: You put all of your money into 1 large CD that will mature on a future date (such as a home purchase 5 years from now).
These strategies not only help you avoid locking up all of your money at low CD rates, but they can also help you earn better returns because you will have access to more than one interest rate when they break or change in the future. With the likelihood of more interest rate cuts coming, taking advantage of these immediate higher short-term yields or using CD laddering will allow you to continue earning interest for the rest of and possibly.

Alternatives to CDs

Although CDs can provide investors with a guaranteed return, they may not be appropriate in every situation.
A high-yield savings account is 100% liquid and pays variable interest rates. A good option for emergency funds.
Money Market Accounts are like savings accounts but typically include a check-writing feature. Interest rates can be comparable to CD rates.
A Short-Term Bond and/or Bond Funds can give investors a little more risk, but there may also be an opportunity for greater returns. Currently, Treasury bills are offering good yields.
Treasury Securities are backed by the government. They are very secure, and no state taxes are imposed on the interest earned from these securities.
If you're going to need access frequently to funds or anticipate rates increasing dramatically, then consider a high-yield savings account instead of a certificate of deposit (CD).