How to open a CD in five steps

Opening a CD takes between one and five business days, depending on your bank or credit union and whether you fund it with money already in an account there. You choose the term length (three months to five years, typically), deposit your money, and the institution locks it at a fixed interest rate for that period. The process itself is straightforward: find an institution, decide on a term and amount, complete an process or online form, fund the account, and wait for confirmation.

Most banks and credit unions let you open a CD entirely online now, though some still require a visit or a phone call. The steps are the same whether you use a large national bank, a regional institution, or an online-only bank — the main difference is speed and the interest rate they offer.

Key Takeaways

  • You can open a CD online, by phone, or in person at a bank or credit union, and the process usually takes one to five business days.
  • You must choose a term length (how long your money stays locked) before you open the account, because the interest rate depends on it.
  • You can fund a CD with a check, wire transfer, or money already in a checking or savings account at the same institution.
  • Your CD is insured up to $250,000 by the FDIC (at banks) or NCUA (at credit unions), so your principal is protected even if the institution fails.
  • Early withdrawal before the term ends costs you a penalty, which the institution discloses before you open the account.

Gather the information the institution will ask for

Before you contact a bank or credit union, have your Social Security number, date of birth, and current address ready. If you are opening the CD in person, bring a government-issued photo ID. If you are opening it online or by phone, you will type or speak this information directly into the process.

You will also need to decide how much money to deposit and for how long. The minimum deposit varies by institution — some accept $500, others $1,000 or $2,500. The term options are usually three months, six months, one year, two years, three years, and five years, though some institutions offer other lengths. The interest rate the bank or credit union offers depends on both the term and the current market, so rates for a one-year CD will differ from rates for a five-year CD at the same place.

Compare rates and terms across institutions

Interest rates on CDs change daily and vary significantly between banks and credit unions. A one-year CD at one bank might pay 4.50 percent annual percentage yield (APY), while another pays 3.75 percent for the same term. Over a year, that difference adds up: on a $10,000 deposit, the higher rate earns $450 in interest, the lower rate $375. The difference grows with larger deposits and longer terms.

You can check rates on the websites of banks and credit unions you already use, or search rate-comparison sites that list current offerings. Write down the term length, minimum deposit, APY, and early withdrawal penalty for each option you are considering. The penalty is usually a certain number of months of interest — for example, "three months of interest" or "six months of interest" — so a higher-rate CD might have a steeper penalty.

Open the account online, by phone, or in person

Most banks and credit unions now offer online CD opening. Go to their website, find the CD product page, and click the button to open a new CD. You will enter your personal information, choose your term and deposit amount, and review the terms and conditions. Read the section on early withdrawal penalties and the maturity date — the day your CD term ends and the bank returns your principal plus interest.

If you prefer to open a CD by phone, call the bank or credit union's customer service number and ask to speak with someone about opening a CD. They will walk you through the same questions and can answer questions about rates or terms in real time. If you open in person at a branch, bring your ID and the amount you want to deposit (as a check or cash, or you can transfer it from another account).

Fund your CD

You have three main ways to put money into your new CD: transfer it from a checking or savings account at the same institution, send a check, or wire money from another bank.

If you already have a checking or savings account at the bank or credit union, the easiest route is to transfer money directly from that account during the CD opening process. The transfer usually completes within one business day, and your CD term begins as soon as the money arrives.

If you are opening a CD at a new institution, you can mail a check to the address the bank provides, or set up a wire transfer from your current bank. A wire transfer is faster — usually one business day — but may cost $15 to $30 depending on your bank. A check takes longer, typically three to five business days for the check to clear and the CD to set up.

Confirm the CD is open and note the maturity date

Once your deposit has been received and processed, the bank or credit union will send you a confirmation. This confirmation includes your CD number, the term length, the interest rate (APY), the deposit amount, the maturity date, and the early withdrawal penalty. Save this document — you will need it if you have questions about the CD or if you want to withdraw money before the term ends.

Mark the maturity date on your calendar. On that date, your CD term ends and the bank returns your principal plus the interest you earned. Some institutions automatically renew your CD for another term at the current rate unless you tell them not to. Others require you to decide what to do with the money — withdraw it, move it to a savings account, or open a new CD. Check your confirmation to see what your institution does, and contact them before the maturity date if you want to change what happens to your money.

Understand what happens if you need the money early

CDs are designed to lock your money away for the full term. If you withdraw before the maturity date, you pay an early withdrawal penalty. The penalty amount is listed in your confirmation and is usually expressed as a number of months of interest — for example, "six months of interest" means you lose six months' worth of the interest you would have earned.

On a $10,000 CD earning 4.50 percent APY with a six-month penalty, withdrawing after three months would cost you about $225 in lost interest. The bank deducts the penalty from your interest earnings first; if the penalty is larger than the interest you have earned so far, they deduct the rest from your principal. Before you open a CD, make sure you will not need the money before the term ends, or choose a shorter term so the penalty is smaller.

Frequently Asked Questions

Can I open a CD with money from another bank?

Yes. You can wire money from another bank, mail a check, or set up an electronic transfer (ACH) if the institution accepts it. Wire transfers usually complete in one business day; checks take three to five business days. Some banks charge a wire fee of $15 to $30, though the bank receiving your money typically does not.

What happens to my CD when it reaches the maturity date?

Your CD term ends and the bank returns your principal plus interest. Some institutions automatically renew the CD for another term at the current rate; others require you to decide what to do with the money. Check your confirmation to see your institution's policy, and contact them before the maturity date if you want to change what happens.

Can I add more money to my CD after I open it?

No. A CD is a fixed deposit — you cannot add to it or withdraw from it without paying the early withdrawal penalty. If you want to deposit more money, you must open a separate CD or put the money in a savings account instead.

Is my money safe in a CD if the bank fails?

Yes, up to $250,000 per depositor per institution. The FDIC insures CDs at banks; the NCUA insures CDs at credit unions. If the institution fails, the FDIC or NCUA returns your principal and any interest earned up to the $250,000 limit.

What is the difference between APY and the interest rate?

APY (annual percentage yield) is the rate the bank quotes you — it includes the effect of compounding, so it is the actual return you will earn. The interest rate (also called the nominal rate) is the base percentage before compounding. Banks must show you the APY so you can compare CDs fairly across institutions.