# Certificate of deposit – Forbes Advisor

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Certificates of deposit (CDs) are a type of term savings account. With these products, you leave your money untouched for a specified period of time. In exchange, you get a fixed return on your main investment.

Forbes Advisor’s Free CD Calculator can help you determine how much interest you will earn by investing in a CD. You can also use it to compare CDs and other savings vehicles, helping you get the best return on your investment.

## Certificate of deposit calculator (CD)

Tips on using our CD calculator appear below, along with some FAQs. We also offer five things to consider when buying a CD.

## How to use this calculator on CD

To get the most out of this calculator on CD, first collect the numbers you will need to enter. You need four values:

• Initial deposit: the amount of money you plan to deposit
• Month: the duration, or duration, of the CD
• Interest rate: the percentage of annual return (APY) that you will be paid
• Compound frequency: how often are the compounds of interest CD

After you have gathered the above information, enter it into the calculator. Once you click on “calculate” you will get your full report.

In practice, say, for example, that you plan to make an initial deposit of \$ 5,000. You find a 12 month CD with an interest rate of 0.75% which compounds daily. According to the CD Calculator, after 12 months, you would earn \$ 37.64 in interest and a total of \$ 5,037.64 in your account.

If you are considering another CD, enter its information into the calculator and see how it measures up. Keep this calculator handy when shopping for the best CD rates, so you can determine which CD will give you the best return on your investment.

## What to consider when choosing a CD

• Make APY (Annual Percentage Return) a priority. CD yields are relatively unimpressive in today’s low interest rate environment. It is therefore crucial to find the best possible return. Prioritize APY when shopping for CDs.
• Avoid early withdrawal penalties. If you withdraw money before the CD’s maturity date, you will usually have to pay an early withdrawal penalty. For the best growth, choose a length of time you can commit to without touching the money.
• Think carefully about the amount of the deposit. When deciding how much to deposit it is important that you take into account your cash flow and how long you can go without your main deposit. Since CDs are term deposit accounts, banks and credit unions often charge early withdrawal penalties, as mentioned above.
• Pick a term that matches your goals. CDs are available in a variety of durations. Use your savings goals and cash flow needs to determine the length of term that’s right for you. Align the duration of the CD with when you will need to access your money.
• Don’t underestimate the frequency of dialing. The frequency of CD composition varies by bank and credit union. To maximize your returns, look for a CD that composes daily. The more frequently your interests compound, the more you earn.

Interest rates on savings deposits are pretty low overall – it’s hard to find a high rate in this environment. Still, CDs provide security and a place to store short-term savings goals. If you don’t anticipate needing to access your funds during the life of a CD, a CD might be a decent product for you. Before deciding on a CD, think about the pros and cons of using a certificate of deposit for your savings.

### How much interest can you earn on a CD?

The interest you can earn on a CD depends on the rate, duration, deposit amount, and dial frequency. Use the CD calculator above to find out how much you could win.

Yes, CDs are considered safe investments. They are insured by the FDIC (Federal Deposit Insurance Corporation) in banks up to \$ 250,000 per depositor, per bank, for each category of account holder, in the event of bank failure. The National Credit Union Administration (NCUA) insures CDs up to the same amount with federal credit unions and the majority of state chartered credit unions.

### Can you lose money with a CD?

Typically, you will only lose money with a certificate of deposit if you withdraw your principal before the CD’s maturity date. The penalty for early withdrawals from banks and credit unions could eat away at all of your interest income and, in some cases, part of your principal.

### Are there different types of CDs?

Yes, there are quite a few. The most common type of CD is known as regular or traditional CD, but banks and credit unions may offer other types as well, including bump-up CDs, step-up CDs, free CDs. penalty and add-on CDs. In these categories, their terms can range from seven days to five years or more.