Where to buy a CD and what you need to start

You can buy a CD from a bank, credit union, or brokerage firm. Each type of institution offers CDs with different rates, terms, and minimum deposits. Banks and credit unions are the most straightforward route for most people — you can walk into a branch, call, or go online to their website and open an account.

To buy a CD, you need an initial deposit (the minimum varies by institution, often between $500 and $2,500, though some go lower or higher), a valid form of identification, and a Social Security number or tax ID. If you're buying through an existing bank or credit union account, the process is faster because they already have your information on file.

Brokerages like Fidelity, Charles Schwab, and Vanguard also sell CDs, sometimes with higher rates than you'll find at your local bank. The trade-off is that brokerage CDs are bought on the secondary market — meaning you're buying from another investor rather than directly from the issuing bank — and you may face early withdrawal penalties if you sell before maturity.

Key Takeaways

  • Banks, credit unions, and brokerages all sell CDs, and rates and terms differ significantly between them, so comparing before you commit is worth the time.
  • You'll need a minimum deposit (typically $500 to $2,500), a valid ID, and a Social Security number or tax ID to open a CD.
  • Bank and credit union CDs are insured up to $250,000 by the FDIC or NCUA, but brokerage CDs carry the same insurance only if the brokerage holds them at an insured institution.
  • The CD term — how long your money is locked in — ranges from a few months to five years or longer, and the rate is fixed for the entire term.
  • If you withdraw money before the maturity date, you'll pay an early withdrawal penalty that can eat into your interest earnings.

Comparing rates and terms across institutions

CD rates change daily and vary widely depending on the institution and the term length. A six-month CD at one bank might pay 4.5 percent, while the same term at another bank pays 3.8 percent. Online banks typically offer higher rates than brick-and-mortar banks because they have lower overhead costs.

The term is the length of time your money stays in the CD. Common terms are three months, six months, one year, two years, three years, and five years. Longer terms usually come with higher rates — a five-year CD will typically pay more than a one-year CD at the same institution. However, this is not a rule; rates depend on what the Federal Reserve is doing and what each bank decides to offer.

To compare, visit the websites of several banks and credit unions, or use a CD rate comparison tool. Write down the rate, the term, the minimum deposit, and the early withdrawal penalty for each option you're considering. The penalty is usually expressed as a number of months of interest — for example, a three-month penalty means you lose three months' worth of the interest you've earned.

Opening a CD account step by step

If you're opening a CD at your current bank or credit union, log into your online account or call the customer service number on the back of your debit card. Ask to open a CD, tell them the term you want (three months, one year, five years, etc.), and confirm the current rate. They'll walk you through the process, which usually takes a few minutes. Your money will be transferred from your checking or savings account into the CD.

If you're opening a CD at a new institution, visit their website or go to a branch. You'll fill out an account process with your name, address, date of birth, Social Security number, and employment information. You'll also choose how to fund the account — by transferring money from another bank, mailing a check, or depositing cash at a branch. Once the process is approved and your deposit clears, the CD opens and your money begins earning interest.

At a brokerage, the process is similar but you're buying individual CDs from a list of offerings rather than opening an account with one issuer. The brokerage holds the CD for you and handles the paperwork. You can buy multiple CDs with different terms and rates in the same account.

Understanding FDIC and NCUA insurance on CDs

CDs held at banks are insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000 per depositor, per institution. This means if the bank fails, your CD and its interest are protected up to that limit. Credit union CDs are insured by the National Credit Union Administration (NCUA) with the same $250,000 limit.

If you have $250,000 or more to invest in CDs, you can spread the money across multiple banks or credit unions to keep each deposit under the insurance limit. For example, a $500,000 CD investment could be split into two $250,000 CDs at two different banks, and both would be fully insured.

Brokerage CDs are also FDIC-insured, but only if the brokerage holds them at an insured bank or credit union. Most major brokerages do this, but confirm with the brokerage before you buy. The insurance limit still applies per institution, so if your brokerage holds CDs at multiple banks on your behalf, each bank's $250,000 limit applies separately.

What happens when your CD matures

On the maturity date, your CD stops earning interest and the money becomes available to withdraw without penalty. The institution will send you a notice a few weeks before maturity telling you what happens next. You have three options: withdraw the money, renew the CD for another term at the current rate, or move the money to a different CD or account.

If you do nothing, many banks automatically renew your CD for the same term at the current rate. This happens during a grace period, usually seven to ten days after maturity. If you don't want to renew, you must withdraw the money or move it before the grace period ends, or it will be locked in again for another full term.

Read the maturity notice carefully so you know your institution's renewal policy and the important date to act. If you miss the window and the CD renews automatically, you can usually withdraw the money within a short period (often a few days) without the early withdrawal penalty, but this varies by bank.

Early withdrawal penalties and when they explore

If you withdraw money from a CD before the maturity date, you'll pay an early withdrawal penalty. The penalty is typically a set number of months of interest. For example, if your CD earns $500 in interest over the year, and the penalty is three months of interest, you'd lose $125 (three months' worth of the $500 annual interest).

The penalty is deducted from your interest earnings first. If you haven't earned enough interest to cover the full penalty, the remaining penalty comes out of your principal — the money you originally deposited. This means you could get back less than you put in if you withdraw very early from a long-term CD.

Some CDs have no-penalty withdrawal options, which let you withdraw a portion or all of your money before maturity without losing interest. These CDs typically pay a lower rate than standard CDs because the bank is taking on more risk. No-penalty CDs are worth considering if you think you might need the money before the term ends.

Special CD types: laddering, bump-up, and add-on CDs

A CD ladder is a strategy where you buy multiple CDs with different maturity dates — for example, one CD that matures in one year, one in two years, and one in three years. As each CD matures, you can reinvest the money in a new CD at the longest term, keeping a portion of your money available each year. This balances the higher rates of longer-term CDs with regular access to your money.

A bump-up CD (also called a step-up CD) lets you increase your rate once during the term if rates rise. This protects you if you lock in a rate and then rates go up — you can bump up to the new higher rate without breaking the CD. The trade-off is that bump-up CDs usually start at a slightly lower rate than standard CDs.

An add-on CD lets you deposit additional money into the CD after you open it, rather than making one lump-sum deposit at the start. This is useful if you're saving gradually and want to lock in a rate while continuing to add to your investment. Not all banks offer add-on CDs, so ask when you're comparing options.

Frequently Asked Questions

Can I withdraw money from a CD before it matures?

Yes, but you'll pay an early withdrawal penalty. The penalty is usually a set number of months of interest and is deducted from your earnings or principal. Some CDs offer no-penalty withdrawal options, though they typically pay lower rates. Check the terms before you buy.

What's the difference between a CD at a bank and a CD at a brokerage?

Bank CDs are issued directly by the bank; brokerage CDs are bought on the secondary market from other investors. Brokerage CDs sometimes offer higher rates, but you may face losses if you sell before maturity because the price of the CD can change. Both are FDIC-insured if held at an insured institution.

How much money do I need to open a CD?

Minimum deposits vary by institution, typically ranging from $500 to $2,500. Some online banks have lower minimums, and some premium CDs require $10,000 or more. Check the specific bank's requirements before you explore.

Is my CD safe if the bank fails?

Yes, up to $250,000. CDs at banks are insured by the FDIC, and CDs at credit unions are insured by the NCUA. If you have more than $250,000 to invest, spread it across multiple institutions to keep each deposit under the insurance limit.

What happens if I don't withdraw my money when the CD matures?

Most banks automatically renew your CD for another term at the current rate during a grace period (usually seven to ten days after maturity). If you don't want to renew, withdraw or move the money before the grace period ends. Check your maturity notice for your bank's specific policy.