Certificate of Deposit (CD) Guide: Rates, Terms & Returns
A CD locks a lump sum for a fixed term at a fixed APY. In 2026, competitive 6- to 12-month CDs pay roughly 4.0%-4.6% APY, so $10,000 earns about $450 in a year at 4.50%. You keep the full rate as long as you leave the money untouched until maturity — an early withdrawal typically costs 3-12 months of interest. Run your own numbers in the CD calculator.
What will your CD actually pay?
Enter the deposit, the advertised APY and the term length.
Interest earned
$425
Balance at maturity
$10,425
If you break it early: a common penalty for this term costs about $106 in interest, so cashing out early can leave you with less than you earned. Penalties are set by each bank and vary by product — check the CD's own disclosure.
Educational estimate. APY is treated as an effective annual yield, so the balance grows by (1 + APY) per year.
How a CD works
You deposit a lump sum, agree to a term, and the bank guarantees an annual percentage yield (APY) for the whole period. APY already includes compounding, so it is the number to compare between banks — not the nominal interest rate. Most CDs compound daily or monthly and credit interest monthly or at maturity.
At the end of the term the CD matures and you have a grace period, usually 7-10 days, to withdraw, move the money, or let it renew. If you do nothing, most banks automatically roll the balance into a new CD of the same length at whatever rate applies that day — often a much worse one. Set a maturity reminder.
Deposits are insured up to $250,000 per depositor, per insured bank, per ownership category by the FDIC (banks) or NCUA (credit unions). That makes a CD one of the few places where the return is genuinely guaranteed — the trade-off is that you give up liquidity, and you take on the risk that inflation outpaces your fixed rate.
CD rates and returns by term
Typical competitive online-bank ranges, with the interest a $10,000 deposit earns over the full term at the midpoint rate. National-bank averages are far lower, which is why shopping around matters more than term selection.
| Term | Typical APY | $10,000 earns | Best for |
|---|---|---|---|
| 3-month CD | 3.9% - 4.4% | $107 | Parking cash you need soon |
| 6-month CD | 4.0% - 4.6% | $222 | Short goals, uncertain rate outlook |
| 12-month CD | 4.0% - 4.5% | $450 | The most common sweet spot |
| 18-month CD | 3.8% - 4.3% | $684 | Locking a rate through a rate-cut cycle |
| 2-year CD | 3.6% - 4.2% | $920 | Medium-term goals |
| 3-year CD | 3.5% - 4.1% | $1,413 | Down payment 3 years out |
| 5-year CD | 3.4% - 4.0% | $2,462 | Long lock, highest total interest |
Illustrative ranges for competitive FDIC-insured institutions; earnings assume annual compounding at the midpoint APY. Actual offers change daily.
Types of CDs
Traditional CD
Fixed rate, fixed term, standard early-withdrawal penalty.
No-penalty CD
Withdraw after the first week without a fee, in exchange for a slightly lower APY.
Bump-up CD
Lets you raise your rate once if the bank's rate for that term goes up.
Step-up CD
Rate increases on a schedule set by the bank when you open it.
Jumbo CD
Requires a large deposit (often $100,000+) and may pay a small premium.
IRA CD
A CD held inside a retirement account, so interest grows tax-deferred.
Brokered CD
Bought through a brokerage; can be sold on the secondary market instead of paying a penalty.
Early withdrawal penalties
Breaking a CD is allowed, but it costs interest. Penalties are set by the bank and disclosed when you open the account:
- • Terms under 12 months: usually 90 days of simple interest.
- • 1-3 year terms: usually 180 days of interest.
- • 4-5 year terms: often 365 days of interest.
If you might need the money, a no-penalty CD or a high-yield savings account is usually the better structure, even at a slightly lower rate. Never put your emergency fund in a term CD — see the emergency fund guide.
CD vs high-yield savings account
| Feature | CD | High-yield savings |
|---|---|---|
| Rate | Fixed for the term | Variable, can change any day |
| Access | Penalty before maturity | Withdraw anytime |
| Insurance | $250k FDIC/NCUA | $250k FDIC/NCUA |
| Best when | Rates are expected to fall | Rates are rising or cash is needed |
Full comparison: CD vs high-yield savings account.
Building a CD ladder
A ladder solves the main CD problem: locking everything up at once. Split $25,000 into five $5,000 CDs at 1, 2, 3, 4 and 5 years. Each year one matures — spend it or roll it into a new 5-year CD. After five years every rung earns the 5-year rate while one rung is always within twelve months of maturing.
Shorter variants work too: a 3-month/6-month/9-month/12-month ladder gives quarterly access. Model each rung separately in the CD calculator and add the results.
When a CD is the wrong tool
- • You may need the money before maturity — use savings instead.
- • Your time horizon is 10+ years; fixed rates rarely beat long-run diversified investing. Compare with the investment calculator.
- • You carry credit card debt at 20%+ — paying that down beats any CD. See the payoff calculator.
CD questions, answered
What is a CD and how does it work?
What is a good CD rate in 2026?
Is a 6-month or 12-month CD better?
How much does a $10,000 CD earn?
What is the penalty for withdrawing from a CD early?
Are CDs safer than a high-yield savings account?
Are CD earnings taxable?
What is a CD ladder?
Related tools and guides
Data current for 2026 tax year