CD Calculator
Calculate Certificate of Deposit earnings and compare different CD terms. CDs offer guaranteed returns and FDIC insurance for your savings.
CD Results
CD Comparison
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Current CD Rates (2024)
3-Month CD: 4.5-5.5% APY
1-Year CD: 5.0-6.0% APY
5-Year CD: 4.5-5.5% APY
FDIC Insured: Up to $250,000 per depositor
Understanding Certificate of Deposit (CD) Accounts
A Certificate of Deposit (CD) is a savings account that earns a fixed interest rate over a specified period of time. CDs are considered low-risk investments and are insured by the FDIC up to $250,000 per depositor.
How CDs Work
- Fixed Term: Choose from 3 months to 5+ years
- Fixed Rate: Interest rate locked for the entire term
- Guaranteed Return: FDIC insurance protects your principal
- Penalty for Early Withdrawal: Fees apply if you withdraw early
- Higher Rates: Generally pay higher rates than savings accounts
CD Terms and Rates
| CD Term | Typical APY Range | Best For | Early Withdrawal Penalty |
|---|---|---|---|
| 3 Months | 4.5-5.5% | Short-term parking | 1-3 months interest |
| 6 Months | 4.8-5.8% | Medium-term savings | 3-6 months interest |
| 1 Year | 5.0-6.0% | Emergency fund | 6 months interest |
| 2 Years | 4.8-5.5% | Conservative investors | 12 months interest |
| 5 Years | 4.5-5.5% | Long-term savings | 24 months interest |
CD Laddering Strategy
CD laddering involves buying multiple CDs with different maturity dates. This strategy provides liquidity while maintaining higher interest rates.
- Example: Buy 6-month, 1-year, 2-year, and 3-year CDs
- Benefits: Access to funds regularly, higher average rates
- Risk: Interest rate risk if rates decline
- Management: Reinvest maturing CDs at current rates
FDIC Insurance
CDs are insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000 per depositor, per bank. This insurance protects your principal and interest if the bank fails.
- Coverage: Up to $250,000 per depositor, per bank
- Joint Accounts: Up to $250,000 per person
- Multiple Accounts: Separate coverage for different ownership
- Online Banks: Same FDIC protection as traditional banks
Tax Considerations
CD interest is taxed as ordinary income. The tax rate depends on your income level and tax bracket.
- Form 1099-INT: Banks report interest over $10 annually
- Tax Bracket: Interest taxed at your marginal rate
- State Taxes: May be subject to state income tax
- Tax-Advantaged Accounts: Consider IRA CDs for tax benefits
When to Use CDs
- Emergency Fund: Low-risk place for 3-6 months of expenses
- Specific Goals: Known timeframes like buying a car
- Conservative Investors: Those uncomfortable with market risk
- Rate Protection: Lock in high rates when available
- Portfolio Diversification: Balance riskier investments
Alternatives to CDs
- High-Yield Savings: More liquidity, lower rates
- Money Market Accounts: Higher rates, check-writing privileges
- Treasury Bills: Government-backed, slightly lower rates
- Bonds: Potentially higher returns, more risk
- CD Laddering: Combines CD benefits with liquidity
Tip: CDs are excellent for conservative savers seeking guaranteed returns and FDIC protection. Shop around for the best rates, consider CD laddering for liquidity, and understand the early withdrawal penalties. CDs work best when you won't need the money during the term and want to lock in current high rates.