CD vs High Yield Savings Calculator Tool

Compound Interest Formulas:

\[ CD: A = P \times (1 + \frac{r}{n})^{(n \times t)} \] \[ Savings: A = P \times (1 + \frac{r}{n})^{(n \times t)} \]

Principal Amount (P):

Time Period (t):

years

CD Interest Rate (r):

Savings Interest Rate (r):

Compounding Periods (n):

CD Final Amount:

CD Earnings:

Savings Final Amount:

Savings Earnings:

Difference (Savings - CD):

Unit Converter ▲

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1. CD vs High-Yield Savings Comparison

Certificates of Deposit (CDs) and high-yield savings accounts are both low-risk savings options, but they differ in liquidity and rate stability. CDs typically offer fixed rates for a set term, while savings accounts offer variable rates with more flexibility.

2. How the Calculator Works

The calculator uses the compound interest formula:

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

Where:

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

Explanation: The formula calculates how your money grows with compound interest, showing the difference between CD and savings account earnings.

3. Understanding the Results

Key Metrics: The calculator shows final amounts, interest earnings, and the difference between the two options. Positive difference means savings earns more; negative means CD earns more.

4. When to Choose Each Option

CDs: Best when you can lock away money and rates are favorable.
Savings: Better for emergency funds or when you need liquidity.

5. Frequently Asked Questions (FAQ)

Q1: Which is safer, CD or savings account?
A: Both are very safe when from FDIC-insured institutions (up to $250,000 per depositor).

Q2: Can I withdraw from a CD early?
A: Yes, but typically with a penalty (often several months' interest).

Q3: Why would savings earn more than CDs?
A: When savings rates rise faster than CD rates, or you compare short-term CDs to high-yield savings.

Q4: How often do savings rates change?
A: Savings rates can change monthly or even more frequently based on market conditions.

Q5: Are there tax differences?
A: No, interest from both is taxable as ordinary income in the year it's earned.