31 plain-English guides to certificates of deposit — what they are, how the maths works, and how to avoid the mistakes that quietly cost savers money.
Term length
$10,000.00 for 1 year, compounded daily. Runs in your browser.
A certificate of deposit is a time deposit: you leave a fixed sum with a bank for a fixed term, and the bank pays a fixed rate that is normally higher…
Read guideA CD normally pays more than a savings account because you give up access to the money for a fixed term. A savings account pays a variable rate you ca…
Read guideAPY is the effective annual yield after compounding; APR is the nominal rate before it. On any account that compounds more than once a year, APY is hi…
Read guideA CD ladder splits one deposit across several CDs with staggered maturity dates. One rung matures at regular intervals, giving you access to cash, whi…
Read guideAn early withdrawal penalty is normally a set number of months of interest — 3 months on short terms, 6 to 12 on longer ones. Calculate it as principa…
Read guideThe best CD term is the one that matches when you need the money, not the one with the highest rate. Short terms preserve flexibility and limit penalt…
Read guideCompound interest means each credited amount joins your principal and earns interest for the rest of the term. The formula is A = P(1 + r/n)^(nt). Ove…
Read guideA jumbo CD typically requires a deposit of $100,000 or more. Historically they paid a rate premium, but that gap has largely closed — many online bank…
Read guideA fixed-rate CD locks one rate for the whole term. Variable, bump-up and step-up CDs let the rate change, usually starting lower in exchange for that …
Read guideCompare CD rates by converting every offer to APY, running each at your actual deposit and term, and reading the renewal terms. The headline rate alon…
Read guideA CD pays a fixed rate for a fixed term with a penalty for early access. A money market account pays a variable rate, stays liquid and often includes …
Read guideWhen a CD matures you enter a grace period of usually 7 to 10 days, during which you can withdraw, add funds, change the term or move the money penalt…
Read guideYes. CDs at FDIC-member banks are insured up to $250,000 per depositor, per bank, per ownership category, and credit union CDs carry equivalent NCUA c…
Read guideOdd-term CDs of 4, 7, 11 or 13 months are promotional products banks use to attract new deposits, and they frequently pay more than the standard 6 or …
Read guideTo build a CD ladder for income, divide your lump sum by the number of years you want covered, open one CD maturing in each year, then reinvest each m…
Read guideA brokered CD is issued by a bank but sold through a brokerage. Instead of paying an early withdrawal penalty you sell it on the secondary market — at…
Read guideAn IRA CD is an ordinary certificate of deposit held inside an IRA. You get the same fixed rate and federal insurance plus the IRA's tax treatment — a…
Read guideA no-penalty CD, sometimes called a liquid CD, locks in a fixed rate but lets you withdraw the full balance without a fee after an initial waiting per…
Read guideA callable CD lets the issuing bank redeem it before maturity, usually after a stated non-call period. You get principal and accrued interest back, bu…
Read guideBoth are low-risk homes for cash. T-bill interest is exempt from state and local income tax, which can beat a higher CD rate in a high-tax state. CDs …
Read guideA CD's value never moves — you get your deposit plus a contracted rate. A bond's price moves inversely with interest rates, so it can gain or lose val…
Read guideCD interest is taxed as ordinary income in the year it is credited, even on a multi-year CD you cannot access yet. Banks report amounts over $10 on Fo…
Read guideAdding a payable-on-death (POD) beneficiary to a CD lets it pass directly to that person without going through probate. It also expands deposit insura…
Read guideIf an FDIC-insured bank fails, your insured CD balance is protected up to $250,000 and is typically available within a few business days. The CD is ei…
Read guideYour real return on a CD is roughly its APY minus the inflation rate. A 4.5% CD during 3% inflation gains about 1.5% in purchasing power. When inflati…
Read guideAn add-on CD lets you make further deposits after opening, and every addition earns the original locked-in rate for the remaining term. It suits saver…
Read guideWhen rates are falling, locking a longer term protects the yield you have — the opposite of the right move when rates are rising. Long CDs, add-on CDs…
Read guideA share certificate is a credit union's version of a CD. The mechanics are identical, insurance comes from the NCUA rather than the FDIC at the same $…
Read guideMost bank CDs require an opening deposit of $500 to $2,500, though many online banks have no minimum at all. Jumbo tiers typically start at $100,000. …
Read guideBoth strategies stagger maturities so money frees up at intervals while the rest earns longer-term rates. A CD ladder is insured, simple to build, and…
Read guideCD rates broadly track the federal funds rate, but that only sets the backdrop. The spread between banks comes from how badly each needs deposits, its…
Read guideEvery article here links back to a calculator that does the arithmetic for your actual deposit, rate and term.