The Usefulness of CD Rates Calculators

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Do I need to use a CD rate calculator?

The Usefulness of CD Rates Calculators

When you are looking at CD rates, it can be difficult to visualize the real dollar difference between two interest rates. Because you are not able to see the dollar difference between a 1.5% interest rate and a 2% interest rate you may assume that the rate difference is not a big deal and could lose out on potential growth.

A CD rates calculator can give you the actual calculations on return for each of the interest rates you are comparing so that you get a real understanding of the potential differences. This will help you make an informed decision based on hard numbers rather than assumptions.

Example
For example, let's say you have $10,000 to invest in a 12 month CD. One bank has a 1.5% interest rate and the other has a 2% interest rate and each has interest that compounds monthly. At the end of 12 months you would have earned $151.04 in interest in the 1.5% CD and $201.84 in the 2% CD. That is a difference of more than $50.

   

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