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Know what’s in store for your money with the help of a CD calculator.
A certificate of deposit, or CD, is a type of high-interest savings account that is closed for withdrawals or deposits for the length of time that you choose. Interest is calculated at a fixed rate, and any payments made while the term is in place are made to a separate account, allowing you to know precisely how much you earn.
If you have a particular goal in mind that you are trying to reach, a CD calculator can help you determine how much you need to deposit and for how long the terms should be in order to reach that goal. Being that the rates are fixed, and not subject to change while your money is locked up, it is easy to determine how much interest you’ll earn by using the calculator.
How do I use the CD calculator?
Fill in the relevant fields with the correct information to get the details you need to help you decide which certificate of deposit to choose.
Deposit amount. This is the amount of money you plan to save in the CD.
Interest rate. Input the listed interest rate for the certificate of deposit you’re investigating. Pay attention to the details, as in most cases that amount will be different depending on a number of factors, including the length of the term, how much you deposit and how often you’re receiving interest payments.
Length of time. This is the number of years you’ll be saving for. You can enter a fraction of a year if your CD term is something like 6 months or 18 months.
Myra is trying to save money in order to put a down payment on a new home in three years. She’s saved $10,000 in a high-interest savings account, but now believes that she will get a better return on her investment with a certificate of deposit. Since she is now earning a steady income that covers her expenses, she is confident that she will have no reason to need that savings before the three-year term ends. The first CD that Myra looks into is offering interest at a fixed rate of 3% per year for a three-year CD. Using the calculator, Myra is able to determine that she will earn $927.27 in interest when that CD matures.
CDs earn interest at a predictable rate, so it should be accurate. However, there may be other factors not taken into consideration that could affect the amount of interest paid to you, such as ongoing fees associated with the CD you pick.
The calculator recognizes terms in years, not months. For example, in this case you would choose a 2.5-year term for 30 months.
You would have to play with the numbers that you insert into the field, particularly the length of terms as this is the option you have the most control over, until you come out with the earnings you want.
No, a high-interest savings account may have additional considerations. To get the most accurate prediction for interest earned on your savings account, use our savings account calculator.
Shirley Liu is a program manager at finder, formerly the publisher for Banking and Investments. She is passionate about helping people make an informed decision, save money and find the best deal for their needs.
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