Compound Interest Guide
Certificates of Deposit and Compound Interest
Learn how CDs may compound interest and what terms can affect the final result.
What a CD does
A certificate of deposit, or CD, usually pays interest for keeping money deposited for a fixed term. The term may be months or years.
Some CDs compound interest, while others may pay interest out on a schedule. The details matter.
Term length and rate
Longer terms may offer different rates, but they also lock money up for longer. Early withdrawals may create penalties.
A compound interest estimate can show possible growth, but it does not automatically include penalties or special account rules.
Check how interest is handled
If interest is paid out instead of reinvested, the compounding effect may be lower. If it remains in the CD, it may continue earning.
Before comparing CDs, read the product terms carefully.