Certificates of Deposit - CDs

Find the best CD rates, including high-yield certificates from online banks.

What is a CD (Also Known as a Certificate of Deposit)?

A certificate of deposit, or CD, is a timed savings deposit held by a bank. Unlike regular savings accounts, with a CD, you commit to depositing your money for a certain period of time, or term. Throughout the term, you earn a fixed interest rate, paid out at specified intervals. However, cashing out your CD funds early (that is, before the maturity date) will typically trigger an early withdrawal penalty and lost interest payments.

A CD offered by an FDIC member bank is a safe investment, protected up to standard FDIC limits — currently $250,000 per depositor per institution.

Why Should I Consider a CD?

CDs are a part of many well-rounded investment portfolios. These accounts offer the safety of a savings account, but with higher interest rates. Because you can count on a fixed interest yield as long as you hold the CD until maturity, CDs are a great product for secure wealth preservation and income.

But a CD isn’t only appropriate for your nest egg. A CD is also a natural place to put any earmarked sum of money that you won’t need for a little while, whether it’s a tuition payment that’s due in six months or a home renovation you have planned for a year from now.

Why are CD Rates Usually Higher Than Savings Account Interest Rates?

By depositing your money in a CD, you have guaranteed the bank access to your money for the full term, be it one month, one year or even five years. Because the bank is able to plan around this time commitment and use your CD deposits in its own higher-earning, longer-term investments, CDs offer better interest rates than savings accounts on average.

If you have money you know you won’t need to access for day-to-day expenses or at a moment’s notice, a CD can be a great place to let those savings grow.

What CD Term Should I Choose?

Choosing a CD term is a balancing act. On the one hand, banks often offer higher CD rates to customers for longer CD terms. On the other hand, the longer the CD term, the higher the likelihood that you may need to tap the money in your CD before it matures.

There’s also interest rate risk: If prevailing interest rates rise while you have a large sum locked into a multi-year CD at a fixed rate, you could lose out on the rise. If you’re buying a single CD, you’ll want to base your choice of CD term on several factors, including when you might need the money and where you think interest rates are headed.

Even with the same CD term, one bank may offer better rates than another, so always compare banks to make sure you’ve located the highest rate on your preferred term.

What is a CD Ladder and How Do I Set One Up?

In the tug-of-war between better interest rates and liquidity, a CD ladder can give you the best of both worlds. A CD ladder is a set of CDs with staggered maturity dates. These staggered maturity dates can help you gain more regular access to your savings while still taking advantage of higher rates.

In other words, with a CD ladder, you can:

• Cash out a portion of your money penalty-free at each maturity date.
• Take advantage of rising CD rates when you roll over each matured CD.
• Allow at least some of your money to earn better interest rates via longer CD terms.

What Matters Most in Choosing a CD?

With any deposit account, it’s important to find the best interest rates by comparing bank offers. But when you’re choosing a CD, it’s even more likely that the interest rate offered will make or break your decision.

Why? When opening a CD, it matters less what the bank’s ATM network, fee schedule or online banking portal look like. Those factors are critical when selecting a savings account or checking account, but they’re less likely to be differentiating factors for a CD. By definition, this is money that you aren’t using for frequent transactions.

Interest rates on CDs can vary widely, so don’t just take the rates your nearest bank offers without seeing what is available elsewhere. It’s easy to do your own comparison shopping with SavingsAccounts.com’s CD rate listings, which appear on this, and other pages.