How To Open a Certificate of Deposit (CD)

A certificate of deposit (CD) is a savings account that holds your money for a set period of time, called a term. In exchange for locking up your cash, the bank pays you a fixed interest rate that is usually higher than a standard savings account. Opening one is quick, and you can often do it online in a few minutes. Here is how to open a CD, step by step, so you can start earning more on your savings.

Key Takeaways

• Opening a CD comes down to five steps: choosing a CD type and term, comparing rates, picking a bank, applying and funding the account.

• You will need basic personal details like your name, address and Social Security number, plus a funding source and an initial deposit that meets the bank's minimum.

• Most CDs charge a penalty for pulling money out early, so only deposit cash you will not need before the term ends.

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Step 1: Choose the Right CD Type and Term

CDs come in different types and term lengths, so start by matching one to your goal. A standard fixed-rate CD locks in one rate for the whole term. Other options include no-penalty CDs, step-up CDs and jumbo CDs for large deposits.

Terms can range from three months to 10 years or more. A longer term usually means a higher rate, but it also means waiting longer to access your money. Think about when you will need the cash, then pick a term that lines up with that date.

Step 2: Compare Rates and Requirements

Once you know the type and term you want, shop around. Rates vary a lot between banks and credit unions, so comparing APY, the annual percentage yield, is the best way to see what you will earn.

As you compare, check these details:

• Minimum deposit: Many CDs require a set amount to open, which can range from nothing to several thousand dollars.

• Early withdrawal penalty: Most CDs charge a penalty of three to 12 months of interest if you take money out early.

• Compounding: Look at how often interest compounds, since more frequent compounding means slightly higher earnings.

According to FDIC data as of July 2026, the national average deposit rate on CDs sits at roughly 1.25%, ranging from about 0.23% on a 1-month term to 1.68% on a 12-month term. 

Step 3: Pick a Bank or Credit Union

Choose a financial institution that fits your needs and, just as important, one that is federally insured. The Federal Deposit Insurance Corp. (FDIC) protects deposits at insured banks up to $250,000 per depositor, per bank, for each account ownership category. Credit unions offer similar protection through the National Credit Union Administration (NCUA).

This coverage means that if the bank fails, your money is protected up to the limit. You do not need to apply for it, coverage is automatic once the bank receives your funds.

Step 4: Apply for the CD

CD applications are usually simple and can be done online or in person. Have your information ready to speed things up. Most banks ask for:

• Your full name and contact information

• Your home address

• Your Social Security number or tax identification number

• A government-issued ID

• A funding source, like a linked checking or savings account

During the application, you will get a disclosure that explains the rate, the term, the penalty and how interest is paid. Read it closely before you agree.

Step 5: Fund Your CD

The last step is putting money into the account. You can typically fund a CD with a transfer from a linked bank account, a check or a wire. Once the money lands and the term starts, your job is done. Your deposit earns interest at the fixed rate until the CD matures. At that point you can withdraw your money plus interest, or roll it into a new CD.

The Bottom Line

Opening a CD can be a straightforward way to earn a guaranteed return on money you will not need for a while. Pick the right term, compare rates, choose an insured bank and fund your account; and then let your savings grow.

FAQs

How much money do I need to open a CD?

It depends on the bank. Some CDs have no minimum, while others require anywhere from a few hundred to several thousand dollars. Jumbo CDs often need $100,000 or more.

Can I open more than one CD?

Yes. There is no limit on how many CDs you can open. Some people open several with staggered terms, a strategy called a CD ladder, so a portion of their money frees up at regular intervals while the rest keeps earning.

What happens if I need my money early?

Most CDs charge an early withdrawal penalty, often equal to a few months of interest. A no-penalty CD is one exception, though it usually pays a lower rate.

Is my money safe in a CD?

At an FDIC-insured bank or NCUA-insured credit union, your deposit is protected up to $250,000 per depositor, per institution, for each ownership category.

Key Terms

Certificate of deposit (CD): A savings account that holds your money for a fixed term and pays a fixed interest rate, usually higher than a standard savings account.

Term: The length of time you agree to leave your money in the CD, ranging from a few months to 10 years or more.

Annual percentage yield (APY): The yearly rate of return on your CD, including compound interest. It is the best number for comparing offers.

Maturity date: The date your CD term ends and you can withdraw your money plus interest without a penalty.

Early withdrawal penalty: A fee, often equal to several months of interest, charged if you take money out of a CD before it matures.

CD ladder: A strategy of opening several CDs with staggered maturity dates so you get regular access to your funds while earning higher long-term rates.

Sources

• Investor.gov: Certificates of Deposit (CDs) 

• Investor.gov: High-Yield CDs: Protect Your Money by Checking the Fine Print 

• Federal Deposit Insurance Corporation: Shopping for a Certificate of Deposit?

• Federal Deposit Insurance Corporation: National Rates and Rate Caps, July 2026