Using the certificate of deposit calculator
Note that in a typical CD, penalties for early withdrawal are quite substantial and might turn a deposit into a worse investment than a savings account if it comes to that. Typically deposits offer higher interest rates than saving accounts and other bank accounts or money market accounts, but this may not hold for so-called flexible deposits with no or small early withdrawal fees. The name 'certificate of deposit' remains for historical purposes when actual paper certificates were issued to certify the deposit agreement. Usually longer-term deposits come with higher interest rates at the cost of locking in of capital and higher inflation risk. The key characteristic of a CD is its rate of interest - the higher, the better, all else being equal. Most deposits have compounding interest rate, meaning that the accrued interest on the principal is periodically added to the principal, resulting in a growing amount of interest without additional money deposits. Most often deposits have a term of 3 months, 6 months, 12 months (one year), or 24 months (two years).
Deposit term lengths usually range from 1 month to 5 years, rarely more. Using the certificate of deposit calculatorĪ certificate of deposit is a contract to deposit money for a fixed period of time that will pay interest to its holder.
