What Is a Certificate of Deposit CD?

That market price isn’t necessarily the exact same as the value of the money in the CD plus its interest rate. While you can sell a brokered CD before its maturity date, you’ll likely lose part of your original investment due to trading costs. That’s why it’s important to chose a CD you can commit to for the entire investment period and simply let it mature and receive the full return of your principal plus interest. A CD is useful when you want to earn a consistent, fixed yield on your lump sum of cash over the term of your savings account, especially if interest rates are declining.

You typically won’t lose money with a CD, as long as you keep your funds invested until the term ends. If you withdraw money from your CD early, you’ll often pay an early withdrawal fee that’s equal to a certain amount of interest. This fee could cut into your principal — the amount you initially deposited — if the fee is greater than the interest you accrued. If you’re looking for flexibility and a better return, another option would be a money market account, Ransom-Cooper added. Most money market accounts require a high minimum balance to earn interest.

Discover Bank CDs

Opening a CD with one of the best rates might mean joining a bank or credit union outside of your primary financial institution, such as an online bank. That move can be worth it, especially to get far better rates than you’d get at traditional banks. This account tends to earn a yield currently of about seven times higher than the national average. At online-only banks, these accounts often won’t have monthly service fees or minimum balance requirements. CD rates are still in a good spot, but there’s a lot in play that could change things.

Find the right savings account for you

These days, CDs don’t usually come on paper, but your funds are still held and federally insured up to at least $250,000 per account at banks and credit unions. CDs are best for individuals looking for a guaranteed rate of return that’s typically higher than a savings account. In exchange for a higher rate, funds are tied up for a set period of time and early withdrawal penalties may apply. The following accounts can be found at most banks and credit unions. They’re federally insured for up to $250,000 and offer a safe place to put your money while earning interest.

• See how we’re dedicated to helping protect you, your accounts and your loved ones from financial abuse.
• While they offer the potential for higher returns, they come with the risk of lower rates during downturns.
• The early withdrawal penalty on a typical CD can be substantial, in some cases exceeding any interest you’ve earned.
• This is usually done daily or monthly and will show up on your statements as earned interest.
• The only way to withdraw the funds is by paying a penalty fee.

When to stick with a savings account

• Make purchases with your debit card, and bank from almost anywhere by phone, tablet or computer and more than 15,000 ATMs and 5,000 branches.
• All CDs require $1,000 to open (or $75,000 if you opt for a jumbo CD, which pays slightly higher APYs).
• FlexibilityBrokered CDs come in a wide range of maturities—as little as 3 months and as long as 20 years.
• There’s a minimum deposit requirement and daily balance of $500.

Because CDs are offered across a wide range of terms, you have the opportunity to get creative with how you take advantage of them. Whether your savings goals are big or small, long- or short-term, there’s a CD savings strategy that will work for you. Now it’s time to put this account to work toward your unique savings goals. But the range of CD rates can vary widely from one financial institution to another.

Current Salem Five Direct CD Rates

Once the CD matures (when the term is over), you can get your money back, in addition to the interest earned over time, or move the money into a new CD. CD terms usually auto-renew at the rate offered at maturity if you don’t do anything. Popular Direct has CD terms of three months to five years, offering up to 4.30% APY. There’s a $10,000 minimum deposit requirement to open a CD account. High Yield CDs and Raise Your Rate CDs have early withdrawal penalties that vary based on your CD term. With the No Penalty CD, withdraw all your money any time after the first 6 days following the date you funded the account and keep the interest earned with no penalty.

The history of the certificate of deposit (CD) traces back to the early 1960s when financial institutions introduced this financial instrument as a secure savings option for customers. Banks initially developed CDs to attract deposits for a fixed period, offering higher interest rates than traditional savings accounts. The first CDs featured fixed maturities and interest rates, providing a predictable return for depositors.

The Bankrate promise

CDs lock up savings for a fixed period of time in exchange for a generally higher rate than other bank accounts. Say you’re holding a brokered CD that you bought with an interest rate of 3%, and 6 months later, market interest rates increase to 4%. Investors often refer to this pricing effect as the “bond seesaw,” because an increase or decrease in interest rates has an inverse effect on the price of a bond or CD. If you bought a brokered CD, you may notice that the price of that CD changes. This price reflects the estimated current market price of your CD or the price you’d get if you sold your CD today. That price is largely determined by the current market interest rates, among other factors.

Is There an Early Withdrawal Penalty for CDs?

It may help to think of CDs as a middle ground between your longer-term investments and the cash that you may need for daily expenses or emergencies. Stay informed about today’s highest CD yields and what banks and credit unions offer them. Bump-up CDs enable you to request an increase in your rate during the CD term under certificate of deposit certain conditions. Banks that offer this CD usually allow just one bump-up per term.

Annual percentage yields (APYs) and minimum deposits are some of the things that make up Bankrate’s score. One of the reasons you might want to consider a CD over a high-yield savings account is because savings accounts have variable APYs, and with a CD you lock in the rate the day you open the account. This can be good if you open an account when interest rates are high. It’s not so great if you open an account after the Federal Reserve slashes interest rates. When you put your money in a CD, you earn a fixed interest rate for a specific amount of time on the money you deposit when you open an account.