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How To Open a Certificate of Deposit (CD)

Last updated 10/27/2022 by

Emily Africa

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Opening a CD savings account is easy with SuperMoney’s resources. First, research and decide the CD strategy that best suits your financial goals. Then, use SuperMoney’s comparison tools to find the best provider with the most competitive annual percentage yield (APY). Finally, apply for and fund your CD. Online banking makes the process seamless.
The sooner you open a CD, the sooner your money can start working for you. Opening a CD account isn’t rocket science. SuperMoney has all the tools you need to choose and open the best CD for your financial goals. We’re here to walk you through the essential steps. Keep reading to learn exactly how to open a certificate of deposit.

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Open a CD in 5 simple steps

Opening a CD isn’t much different from opening other savings accounts. A certificate of deposit is a type of savings account that typically offers higher interest rates in exchange for longer holding terms. Follow these steps, and you’ll be on your way to saving and earning.

Step 1: Choose your CD type and terms

CDs aren’t one-size-fits-all. There are various types and terms suited for various financial goals. For example, you can use a CD to save and pay for real estate. If you have a rocky credit history, you can even use a CD as collateral for a loan. If you want to open a CD, the first thing to do is get clear on what type and term you need.

Deciding on a CD type

CDs are all about maximizing interest while optimizing liquidity for your specific needs. With a traditional CD, you’ll have to pay an early withdrawal penalty if you want to access the money before the term is up. A liquid certificate of deposit offers no early withdrawal penalties but lower interest rates.
Other CDs include IRA CDs, bump-up CDs, and jumbo CDs. Learn about these types of certificates of deposit and more with SuperMoney.

Single, joint, or custodial accounts

Decide with your partner or significant other if you want a joint CD between the two of you. The main benefits of joint accounts are that both parties have access to the account and your insurance coverage doubles.
Some financial institutions offer custodial CD accounts. With custodial CDs, a parent or guardian can open a CD account on behalf of a minor. This is a great option for helping kids build a financial portfolio early on.

CD terms

The CD’s term determines its APY (annual percentage yield). CD APYs are consistent for the entire term. Terms range from 3 months to five years. Typically, longer-term CDs offer higher interest rates. Your ideal term length wholly depends on when you need to access the money. Keep in mind that you’ll face an early withdrawal penalty if you need to access your CD savings before the maturity date.

Pro tip

If you want some savings available sooner and the opportunity to reinvest your returns, consider CD laddering.

Ladder CDs vs. regular CDs

CD laddering is an important strategy to know about before opening a CD. With a CD ladder, you disburse your savings equally to several CDs with varying terms and rates. This way, you benefit from both higher interest rates and liquidity. If you do it right and interest rates are on your side, you have the potential for higher and more predictable returns.
CD laddering isn’t for everyone, though. Putting all of your funds in a single regular CD could be better for long-term savings goals.

Step 2: Decide how you want to receive interest payments

Interest income is one of the main perks of CDs. When you open a CD, you’ll have to indicate the frequency and method of interest payments. At most financial institutions, you have two main options.
  1. Periodic disbursements: Get regular cash flow of interest in monthly or annual interest payments.
  2. End-of-term interest payout: Reinvest your interest into the account over its term and get your interest payment at the end. This is a great strategy to compound your earnings.

Step 3: Pick a financial institution

Once you know what kind of CD you’re looking for, you need to find a financial institution that offers it with competitive rates, terms, and services. Luckily, SuperMoney is here to help you find the best CD accounts out there. Our thorough and objective CD account comparison tools help you find exactly what you need.
CD-shopper’s tip: Make sure your financial institution is FDIC (Federal Deposit Insurance Corporation) or NCUA (National Credit Union Administration) insured. If a bank or credit union goes under, these organizations protect your money — up to legal limits — from going under with it.

SuperMoney may receive compensation from some or all of the companies featured, and the order of results are influenced by advertising bids, with exception for mortgage and home lending related products. Learn more

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Step 4: Apply for your CD

The first three steps involve research and decision-making. Finally, you’re ready to take action. To summarize what we’ve covered so far, here’s what you should know before starting your CD application.

Decisions, decisions

Before you open a certificate of deposit, you’ll need to have researched, thought about, and made decisions concerning:
  1. The type of CD you want
  2. The term length at which you want it
  3. How and how often you want to receive interest payments
  4. The financial institution that can offer the highest interest rate at your desired term
Now you’re prepared and confident entering into your CD account application. The good news is most banks and credit unions offer online CD account services. Just visit the website of your chosen financial institution to begin the application process. If you prefer, you always have the option of opening an account in person by visiting your local bank or credit union.

Key info and documents to open a certificate of deposit

Have the following information ready when applying for a CD.
  • Government ID (Have two forms of ID ready as some banks and credit unions require them.)
  • Social Security number
  • Contact information including your email and phone number
  • Your U.S. residential address
  • Occupation
  • External bank account information for the initial deposit (name, routing number, and account number)

Step 5: Fund your CD

Fund your certificate of deposit using direct deposit, check, or phone transfer. Most CDs require one and only one initial deposit upon opening. After that, you won’t be able to deposit any additional money into the account. While it might seem obvious, it’s worth noting that the more you deposit, the more interest you’ll make.
Additionally, most CDs have minimum deposit requirements depending on your type and term. Many traditional CD minimums fall between $0 and $1,000. Check with your financial institution to determine the minimum deposit requirements for its CDs.

Now what? What to do after opening a CD account

A CD is great because you can set it and forget it. After you’ve completed the five steps to opening a CD account, all that’s left to do is wait and watch it earn interest.
When a CD term is up, you can withdraw your funds and interest earnings or invest them into a new CD. Typically, you have seven to 10 days after the maturity date to do so before the CD auto-renews. If you don’t withdraw within this grace period, you may face penalties and a new interest rate.

If you can’t commit to the fixed term of a CD

Though some CDs have very short terms compatible with the needs of most savers, most doesn’t mean all. If you need more flexibility but still hope to earn a bit more than an average traditional savings account offers, consider a money market account.

SuperMoney may receive compensation from some or all of the companies featured, and the order of results are influenced by advertising bids, with exception for mortgage and home lending related products. Learn more

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Can anyone open a certificate of deposit?

Virtually anyone can open a certificate of deposit. Factors that would prevent one from opening a CD include being a minor, not meeting minimum deposit requirements, and not having a bank account. In such cases, one may consider another type of savings account such as a money market account.

How much does it cost to open a certificate of deposit?

Opening a certificate of deposit is free, but you do need to meet minimum deposit requirements. Many financial institutions require a minimum deposit of $500 to $1,000 for traditional CDs. Other types of CDs may have different requirements.

Can you open a certificate of deposit online?

Yes, you can open a CD online with most banks and credit unions.

Who has the highest 12-month CD rate?

CD rates change often. Barclay’s offers a competitive APY on a 12-month CD with no minimum. (In October 2022, “competitive” meant 3.25%.)

How much money do you need for a CD?

For most traditional CDs, you need a minimum of $500 to $1,000. Some banks and credit unions don’t have minimum balance requirements.

Where should I open a CD?

There are dozens of great options when it comes to opening a CD. Which you should choose depends on your desired CD term and type. Check out CIT Bank and US Bank for some of the most competitive rates.

Do CDs pay interest monthly?

Many CDs offer monthly interest payments. Before opening a CD, check with your financial institution and decide how you want to receive interest payments.

Where can I get a CD?

You can get a CD account at many banks, credit unions, and brokers. Use SuperMoney’s CD account comparison tools to find the best one for you.

Key takeaways

  • It’s important to do your research and define your financial goals before opening a CD. You should have a clear understanding of what type of CD you want, how long you want the term to be, and how you want to get interest payments.
  • Consider setting up a CD ladder to maximize your returns and benefit from staggered terms.
  • SuperMoney’s comparison tools are here to find the best provider with the most competitive rates and offerings. You can easily apply for and fund your CD online with most financial institutions.
  • Most CDs allow only one deposit. Additionally, some have minimum balance requirements.
  • Once you deposit money into a CD account, your work is done for a while. Keep a record of when the account matures so that you can decide whether to withdraw or reinvest your funds.
Related reading: Certificates of deposit aren’t the only way to earn interest on your savings. Consider money market accounts versus CDs to see which best fits your financial goals. Utilize SuperMoney’s money market account comparison tools to learn more!If you are a risk-averse investor but aren’t sure you want to go with either a money market account or a CD, perhaps a savings bond would be more to your liking.

SuperMoney may receive compensation from some or all of the companies featured, and the order of results are influenced by advertising bids, with exception for mortgage and home lending related products. Learn more

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