Bank Certificate of Deposit Decision Tool

With rising interest rates, you may find that an old certificate of deposit (CD) is no longer earning a competitive interest rate. You may be asking yourself if it's better to withdraw the money from the CD (break the CD) and deposit that into a new CD at a higher interest rate. The issue that complicates this decision is the interest penalty that is charged when you break a CD. Due to this penalty it may be better to just keep the current CD until maturity.

Should you keep the CD or get a new CD. This tool is intended to help you decide which option will make you the most money.

The Certificate of Deposit Tool

Bank CD Tool Ver 1.0 - Keep or Break CD?
New CD
APY of new CD (i.e. 5.25):
Current CD
APY of CD (i.e. 4.25):
Current Balance (no commas):
Remaining Time left:
years | months | days
Interest Penalty:
years | months | days
Approximate Results
Ending balance when breaking CD:
Ending balance without breaking CD:
Gain by Breaking CD:

Example

To see how this tool works, click the "show example" button on the bottom of the form. This populates the input fields. The example assumes that a new CD is available with an Annual Percentage Yield (APY) of 6.00%. It assumes a current CD has an APY of 4.00%, a current balance of $10,000 and has 12 months remaining until maturity. In addition, it assumes that a penalty of 3-months interest will be assessed if you break the CD.

Select "Calculate Results" to determine the best decision. In this example, breaking the CD and transfering the amount minus the penalty into the new CD would result in $94 more than if the current CD is left to mature. Note, the results are approximate since it does not take into account the compouding methods of the CDs. It does factor in compounding but assumes yearly compounding for both new and old CDs.

Another thing to note is that the ending balance is at the time the original CD would have matured even for the option that the original CD is redeemed early and a new CD is opened. So it's not the ending balance of the new CD. This was done for simplicity.

Other Financial Calculators?

There are many other bank-related calculators on the web. One of the best sites is at dinkytown.net. Also, Dollar Times and MyMoneyBlog have some useful calculators. One at MyMoneyBlog helps you decide if it's worth moving your money to a savings account with a higher rate. You have to consider the time it takes to transfer when you are earning no interest. If you know of other good financial calculator sites, please leave a comment.

Questions? Problems?

If you have an idea how to improve this tool, feel free to leave a comment or email me at bankdeals@gmail.com. I'm also interested in any problems you may find. I'm sure there'll be many revisions.