Certificates of Deposit: All You Need to Know (2024)

Banking
Certificate of Deposits (CDs)

Learn all about various types of certificates of deposit, how they work and how they potentially fit into your savings and investment planning. Browse Investopedia’s expert-written library to learn more.

Best CD Rates

Best CD Rates for February 2024: Top Rates Today Up to 5.75%BySabrina KarlUpdated Feb 20, 2024Top CDs Today: Leading 1-Year Rate Falls, Top Overall Offer Holds at 5.75%BySabrina KarlPublished Feb 20, 2024Best 1-Year CD Rates for February 2024 (Up to 5.56%)BySabrina KarlUpdated Feb 21, 2024Best Jumbo CD Rates for February 2024BySabrina KarlUpdated Feb 20, 2024Best 18-Month CD Rates for February 2024 (Up to 5.45%)BySabrina KarlUpdated Feb 20, 2024

Guide to CDs

What Is a Certificate of Deposit (CD) and What Can It Do for You?ByJason FernandoUpdated Feb 16, 2024History of CD Interest RatesBySabrina KarlUpdated Jan 26, 2024How Certificate of Deposit (CDs) Maturities Work ByMatt Ryan WebberUpdated Feb 16, 2024How To Pick the Right CD Term for MeByJennifer NelsonUpdated Feb 10, 2024Are CDs FDIC Insured?ByKaron WarrenUpdated Feb 05, 2024

Frequently Asked Questions

Can you build credit with CDs?
CDs, along with other types of deposit products, do not build credit. Only borrowing money through some type of loan from a financial services lender that reports to credit bureaus, like with a car loan, personal loan or credit card, can build a credit history.
Learn More:Do certificates of deposit help build credit?
Are CDs different from U.S. savings bonds?
Yes, CDs are different from U.S. savings bonds in that CDs are a deposit account that have a fixed term held with commercial banks and U.S. savings bonds are debt obligations of the United States federal government. U.S. savings bonds also offer fixed terms that pay interest at maturity but provide longer term options compared to traditional CDs.
Learn More:U.S. Savings Bonds vs. CDs: What’s the Difference?
See Also
Certificate of Deposit (CD)Wat is een Certificate of Deposit? - ManagementSite What Is a Certificate of Deposit?Certificate of Deposit (CD)
How can an individual invest with certificates of deposit?
Investable funds can be deposited in certificate of deposit instruments of various terms with commercial banks, where they will earn fixed or variable interest that is payable at maturity.
Learn More:How to Invest With CDs
Which is a better savings option - CDs or Money Market Savings?
Certificates of deposit typically pay higher interest than money market savings accounts due to the fact that they are less liquid and involve a penalty for early withdrawal. Money market savings accounts allow for limited withdrawals but do not have a maturity date or early withdrawal penalty involved. The better option depends on whether yield maximization or flexibility is more important to your financial needs.
Learn More:Money Market Accounts or CDs: Which Investment Is Better?

Key Terms

Fixed-Rate Certificate of Deposit (CD)
A fixed rate certificate of deposit is a CD that has a set or fixed interest rate that is paid over the entire term of the instrument. The total fixed interest earned along with the CD principal is paid to the investor once the certificate of deposit reaches maturity.
Learn More
See Also
What Are the Pros and Cons of Certificates of Deposits?
Variable-Rate Certificate of Deposit (CD)
Variable rate CDs are deposit instruments that have a fixed term but pay a variable rate of interest over the term of the instrument that can be based on an index like the prime rate. Upon maturity the principal and variable interest earned are paid to the depositor.
Learn More
Jumbo Certificate of Deposit (CD)
A jumbo certificate of deposit is a CD that has a larger minimum deposit, which is $100,000, compared to regular CDs. Traditional certificates of deposit typically have a minimum deposit of $2,500. As with traditional certificates of deposit, interest earned is paid at maturity along with return of the principal.
Learn More
Add-On CDs
An add-on CD is a type of certificate deposit that allows for additional deposits to be made before maturity of the instrument. Most CDs do not allow additional deposits to be made, however, and require a lump sum deposit at the beginning of the CD term. Add-on CDs typically pay lower interest compared to traditional CDs in exchange for the flexibility that they offer.
Learn More
CD Ladder
A CD ladder is when a depositor spreads their deposits over number of certificates of deposit across multiple maturity periods, with each successively longer maturity term representing the ascending rungs of a ladder. Using this approach reduces the risk associated with interest rate fluctuations over time by allowing the depositor to continually roll over shorter term CDs and reinvest longer term CDs as they reach maturity in order to optimize yield.
Learn More
Uninsured Certificate of Deposit
Uninsured certificates of deposit are CDs that are not covered by Federal Deposit Insurance Corporation (FDIC) or the National Credit Union Association (NCUA). These types of CDs pay higher interest rates to investors due to the higher risk they present. Uninsured CDs are offered by investment firms and foreign banks that are not eligible for insurance coverage.
Learn More
Brokered Certificate of Deposit (CD)
Brokered CDs are offered to investors through investment firms and are technically not insured by the FDIC. However, the savings held by the investment firm with a commercial bank, from which the brokered CDs are created, are insured, which offers investors a degree of protection. Brokered CDs offer investors more flexibility and higher yields vs. traditional certificates of deposit but also present higher risk.
Learn More
Liquid Certificate of Deposit (CD)
A liquid certificate of deposit is a type of CD that allows the investor to make withdrawals before the CD reaches maturity without incurring an early withdrawal penalty. Traditional certificates of deposit do impose early withdrawal penalties so liquid CDs offer much more flexibility, although they pay less interest in exchange for that flexibility.
Learn More

Don’t Avoid CDs Because You Fear Early Withdrawal PenaltiesByDawn PapandreaUpdated Sep 27, 2023Unsure About Committing to a CD? 5 Ways to Make It WorkBySabrina KarlUpdated Feb 20, 2024Types of Specialty Certificates of Deposit (CDs) ExplainedByJason Fernando and Rachel MurphyUpdated Feb 17, 2024Can You Donate CDs to Charity?ByAndrew MartinsUpdated Feb 09, 2024Can You Automatically Roll Over a CD When the Term Expires? ByMatt Ryan WebberUpdated Nov 01, 2023

Explore Certificate of Deposits (CDs)

Certificate of Deposit (CD) vs. Checking Account: Which Should You Open?ByAndrew MartinsUpdated Feb 08, 2024Certificates of Deposit (CDs) vs. Savings Accounts: Which Is Better for You?ByAndrew MartinsUpdated Feb 20, 2024Are Transfer-on-Death CD Accounts Subject to Estate Taxes? ByMatt Ryan WebberUpdated Feb 10, 2024Credit Union vs. Commercial Bank CDs ByMatt Ryan WebberUpdated Feb 20, 2024Can You Bypass Probate With CDs?ByMatt Ryan WebberUpdated Oct 29, 2023Who Can Be a Transfer on Death (TOD) Beneficiary? ByMatt Ryan WebberUpdated Feb 17, 2024Can You Buy a CD with Foreign Currency in a Foreign Country? ByMatt Ryan WebberUpdated Aug 02, 2023Inherited CDs: How and When to Reinvest Your FundsByMatt Ryan WebberUpdated Feb 10, 2024CDs vs. ETFs: What's the Difference? ByMatt Ryan WebberUpdated Jan 16, 2024CDs vs. Crypto: What's the Difference?ByMatt Ryan WebberUpdated Oct 21, 2023Do CDs Pay Compound Interest? ByMatt Ryan WebberUpdated Feb 14, 2024CDs vs. Annuities: What's the Difference?ByMatt Ryan WebberUpdated Oct 21, 2023Best 4-Year CD Rates for February 2024BySabrina KarlUpdated Feb 20, 2024Best 3-Month CD Rates for February 2024BySabrina KarlUpdated Feb 20, 2024Are Certificates of Deposit (CDs) Tax Exempt?ByKaron WarrenUpdated Feb 17, 2024What Is the Best Age to Invest in a CD?ByRebecca LakeUpdated Feb 08, 2024Short-Term vs. Long-Term CD TermsByRebecca LakeUpdated Feb 16, 2024Step-Up Certificate of Deposit (CD)ByKaron WarrenUpdated Feb 09, 2024What Happens to My CDs When I Die?ByRebecca LakeUpdated Feb 17, 2024Best Time To Buy a CDByRebecca LakeUpdated Feb 14, 2024Should You Put CDs in an IRA?ByRebecca LakeUpdated Feb 14, 2024Can You Trade Certificates of Deposit?ByRebecca LakeUpdated Feb 18, 2024Can You Fund a 529 Plan With a CD?ByAndrew MartinsUpdated Feb 20, 2024Do CDs Make Sense in a Rising Inflation Environment?ByJennifer NelsonUpdated Feb 16, 2024How Many CD Terms Are There? ByMatt Ryan WebberUpdated Feb 15, 2024How To Give a CD as a Gift ByMatt Ryan WebberUpdated Feb 15, 2024How to Inherit a CDByMatt Ryan WebberUpdated Oct 26, 2023Annual Percentage Yield (AYP): What It is, How It WorksByMatt Ryan WebberUpdated Feb 13, 2024How to Open a CD for a Child ByMatt Ryan WebberUpdated Oct 21, 2023Are Online Certificates of Deposit (CDs) Safe?ByMatt Ryan WebberUpdated Jul 24, 2023Who Invented CDs?ByRebecca LakeUpdated Feb 08, 2024How Many CDs Can I Have?ByRebecca LakeUpdated Feb 15, 2024Should You Have CDs at Multiple Banks?ByRebecca LakeUpdated Aug 16, 2022What Are the Rules for CD Beneficiaries?ByRebecca LakeUpdated Feb 17, 2024Jumbo CDs vs. Regular CDs ByMatt Ryan WebberUpdated Feb 09, 2024Does It Make Sense To Buy CDs When Interest Rates Are Low?ByRebecca LakeUpdated Feb 15, 2024Pros and Cons of CDsByRebecca LakeUpdated Feb 15, 2024Are CDs Worth It?ByRebecca LakeUpdated Feb 16, 2024How Does a CD Account Work? ByMatt Ryan WebberUpdated Feb 16, 2024What Can CDs Be Used For?ByMatt Ryan WebberUpdated Feb 10, 2024Do CD Rates Go Up When the Prime Goes Up?ByJennifer NelsonUpdated Feb 17, 2024How to Close a CD ByMatt Ryan WebberUpdated Oct 23, 20235 Steps to Open a Certificate of Deposit (CD)ByMatt Ryan WebberUpdated Oct 24, 2023CD Early Withdrawal Penalty ByMatt Ryan WebberUpdated Feb 13, 2024When Were Certificates of Deposit (CDs) Invented?ByAndrew MartinsUpdated Feb 10, 2024CDs vs. Mutual Funds ByMatt Ryan WebberUpdated Oct 22, 2023CDs vs. Stocks: What's the Difference? ByMatt Ryan WebberUpdated Oct 29, 2023Who Can Issue Certificates of Deposit?ByAndrew MartinsUpdated Feb 08, 2024Add-On CDs: Meaning, Pros and Cons, ExampleByRebecca LakeUpdated Feb 08, 2024Best 5-Year CD Rates for February 2024BySabrina KarlUpdated Feb 20, 2024Best 2-Year CD Rates for February 2024BySabrina KarlUpdated Feb 20, 2024Best Bank CD Rates for February 2024BySabrina KarlUpdated Feb 20, 2024How to Invest With CDsByJames McWhinneyUpdated Feb 16, 2024Best 10-Year CD Rates for February 2024ByDaniel KurtUpdated Feb 20, 2024Best 3-Year CD Rates for February 2024ByDaniel KurtUpdated Feb 20, 2024Best 6-Month CD Rates for February 2024ByDaniel KurtUpdated Feb 20, 2024CD Ladder: How to Make One, Benefits, FAQByJulia KaganUpdated Feb 08, 2024Money Market Accounts or CDs: Which Investment Is Better?ByRichard BestUpdated May 18, 2022U.S. Savings Bonds vs. CDs: What’s the Difference?ByEvan TarverUpdated Feb 09, 2024Jumbo Certificate of Deposit (CD): Meaning, Pros and ConsByJulia KaganUpdated Feb 13, 2024

Banking

Bank ReviewsChecking AccountsSavings AccountsMoney Market Account