CD vs High Yield Savings Calculator

CD vs High Yield Savings Calculator - Amex

Compound Interest Formulas:

\[ A = P \times \left(1 + \frac{r}{n}\right)^{n \times t} \]

Principal Amount (P):

Term Length (t):

years

CD Interest Rate (r):

% APY

Savings Interest Rate (r):

% APY

Compounding Periods (n):

CD Final Amount:

Savings Final Amount:

Difference (Savings - CD):

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1. CD vs High Yield Savings Comparison

This calculator compares the growth of money in a Certificate of Deposit (CD) versus a High Yield Savings Account, using the compound interest formula. It helps determine which option yields better returns based on current rates.

2. How the Calculator Works

The calculator uses the compound interest formula:

\[ A = P \times \left(1 + \frac{r}{n}\right)^{n \times t} \]

Where:

$ A $ — Final amount ($)
$ P $ — Principal investment ($)
$ r $ — Annual interest rate (decimal)
$ n $ — Compounding periods per year
$ t $ — Time in years

Explanation: The formula calculates how money grows with compound interest, accounting for how often interest is added to the principal.

3. Key Differences Between CDs and Savings

CDs: Fixed term, fixed rate, early withdrawal penalties, typically higher rates than regular savings.
High Yield Savings: No term, variable rates, no withdrawal penalties, more liquidity but potentially lower rates.

4. Using the Calculator

Tips: Enter your principal amount, term length, current CD and savings rates, and compounding frequency. Compare the final amounts to see which option is better for your situation.

5. Frequently Asked Questions (FAQ)

Q1: Why would I choose a CD over a high yield savings account?
A: CDs typically offer higher fixed rates for locking up your money for a set term, while savings accounts offer more flexibility.

Q2: What happens if I withdraw from a CD early?
A: Most CDs charge an early withdrawal penalty (typically several months of interest), which would reduce your earnings.

Q3: Can savings account rates change?
A: Yes, savings account rates are variable and can change based on market conditions and Federal Reserve decisions.

Q4: How often do Amex CDs and savings accounts compound?
A: Amex CDs typically compound daily, while their high yield savings also compounds daily. Check current terms for exact details.

Q5: Is my money FDIC insured in both options?
A: Yes, both Amex CDs and savings accounts are FDIC insured up to $250,000 per depositor, per institution.