A CD pays more than a savings account because you agree not to touch the money. Whether that trade is worth it depends on a number most comparisons leave out: what it would cost if you had to touch it anyway.
How it works
Both sides are grown at their stated APY over the term. The difference is the CD’s advantage. Against that, the calculator sets the early withdrawal penalty — so you can see whether the extra interest is actually larger than the cost of breaking the CD.
The penalty is often bigger than the advantage
On $10,000, a 4.5% CD beats a 3.8% savings account by about $146 over two years. A six-month early withdrawal penalty on the same deposit is $225. So the entire two-year advantage is wiped out — and then some — by one early exit. That does not make CDs a bad product; it makes them a bad product for money you might need. The right question is not which rate is higher but how confident you are about the term.
What this does not include
This assumes both rates hold for the whole term, which is true of the CD and not of the savings account — a savings rate is variable and the bank can change it at any time, so a savings account that looks close today may drift. Interest from both is taxable, which this does not model, and both are FDIC-insured to the same limits.
How to use this calculator
- Enter the amount and the two APYs you are choosing between.
- Enter the CD term in years.
- Enter the CD’s early withdrawal penalty in months of interest to see whether the advantage survives an early exit.
Frequently asked questions
Should I always pick the higher rate?
No. The higher rate is only better if you can leave the money for the full term. If there is a realistic chance you will need it, compare the advantage against the penalty — as the default figures here show, the penalty frequently wins.
What if savings rates rise during the CD term?
You are locked in and the savings account is not, so a rising-rate period favours staying liquid. The reverse is also true: a fixed CD rate protects you if rates fall. That is the real trade, and neither direction is knowable in advance.
Is a CD safer than a savings account?
Both are FDIC-insured to the same $250,000 per depositor, per bank, per ownership category. Neither is safer in that sense. What differs is access, not credit risk.
What about a CD ladder?
Splitting money across CDs maturing at different dates keeps part of it reachable each year while most of it earns the longer-term rate. It is a middle path between the two options compared here, and there is a separate CD ladder calculator on this site for it.
