Thinking about opening a CD? Here’s what to know

A safe, steady way to grow your savings, on your terms

If you’re looking for a low-risk way to grow your savings, a certificate of deposit (CD) might be a smart move. CDs are designed to help you earn interest on money you don’t need to touch right away. And they can be a great fit for people who want stability, predictability, and a guaranteed return.

Unlike traditional savings accounts, CDs typically offer a fixed rate for a fixed period. That means once you open a CD, your rate is locked in for the term, regardless of what happens in the market.

Whether you're saving for a specific goal or want to put some money aside, here’s what to consider when deciding if a CD is right for you.

What is a CD?

A certificate of deposit is a type of savings account that holds a set amount of money for a specific period—called the term—in exchange for earning a guaranteed rate of interest.

CDs are generally offered in terms ranging from a few months to several years. During that time, your money stays put, and you’ll earn interest without having to make monthly contributions or actively manage the account.

CDs are often used to save for short- to mid-term goals, such as:

• A future down payment on a home
• A new car
• A wedding or a big celebration
• Tuition payments or other planned expenses

Because your money is locked in, CDs aren't ideal for emergency funds or everyday access. Withdrawing early usually comes with a penalty, which can reduce or eliminate the interest you’ve earned.

Use our Savings Calculator Library to help you plan.

Choosing the right CD term for you

The best CD for you depends on your timeline and money goals. Ask yourself:

1. When will I need this money?
2. Am I comfortable leaving it untouched for the full term?

If you’re saving for something a few years down the road, a longer-term CD might make sense. If your timeline is shorter or you want more flexibility, a short-term CD could be a better fit.

And if you're not saving for a specific goal? That’s okay too. CDs can still be a good way to grow your savings without taking on risk. But you’ll want to choose a term that fits your comfort level.

Compare one-year and five-year CDs to see which one aligns with your savings goals.

What are the benefits of a CD?

CDs offer several features that make them attractive to many savers:

Predictable, fixed returns
Your interest rate stays the same throughout the term.

Low risk
CDs are typically insured (up to the applicable limits) by the FDIC when opened at a member bank.

No maintenance
You make a one-time deposit, then let your money grow.

No monthly fees
Most CDs don’t charge maintenance fees, so your savings stay on track.

Things to Keep in Mind

Before opening a CD, it helps to understand the trade-offs:

Limited access
You won’t be able to access the funds without a potential penalty until the CD matures.

Not ideal for ongoing contributions
If you want to add money regularly, a traditional or high-yield savings account may be a better fit.

Opportunity cost
Since your rate is fixed, you won’t benefit from any future rate increases during your term.

Taxable interest
You may owe taxes on the interest earned, even if you don’t withdraw the funds right away.

Is a CD right for you?

CDs can be one of the best options for savers who:

• Want a guaranteed return
• Have a specific savings goal or timeline
• Don’t need regular access to their money
• Prefer a low-risk, set-it-and-forget-it strategy

If you’re looking for flexibility or want to build savings over time with smaller, ongoing deposits, consider pairing a CD with a traditional or high-yield savings account for a more well-rounded approach.

Final thoughts

Opening a CD can be a smart, stable way to grow your savings, especially when you're looking for a reliable return without taking on market risk. Just make sure the term, deposit amount, and access limitations line up with your goals and comfort level.

Ready to explore your options? Compare CD types and features to find the one that’s right for you.

Or if you still have questions, we’re happy to help you take the next step.