The basic process: where to go and what you need

You buy a CD by opening an account at a bank, credit union, or brokerage firm, then depositing money for a set period at a fixed interest rate. The institution holds your money until the maturity date you choose—anywhere from a few months to five years or longer—and pays you the agreed rate when the term ends. You can start with as little as $500 at many banks, though some require $1,000 or $2,500 minimums.

The fastest route is your current bank. Log into your online account, look for "CDs" or "Certificates of Deposit" in the deposit products menu, choose your term length and amount, and confirm. The money moves from your checking or savings account into the CD immediately. If your bank doesn't offer CDs online, call the branch or visit in person with your account number and ID.

If you want to compare rates across many banks at once, use a brokerage firm like Fidelity, Charles Schwab, or Vanguard. These firms let you search CDs from hundreds of banks and buy them in one place. The process is the same: log in, select a CD, enter the amount, and confirm. Your brokerage account holds the CD until maturity.

Key Takeaways

  • You can buy a CD online through your bank's website in minutes by selecting the term length, entering the amount, and confirming from your checking or savings account.
  • Most banks require a minimum deposit between $500 and $2,500, though some have no minimum or allow deposits as low as $100.
  • Brokerage firms like Fidelity and Charles Schwab let you compare CD rates from hundreds of banks and buy them all in one account.
  • Your money is locked in until the maturity date you choose; early withdrawal usually costs you a penalty equal to several months of interest.
  • The interest rate is fixed when you buy, so you know exactly how much you will earn before you commit your money.

Choosing a term length that matches your timeline

CD terms range from three months to ten years, and the rate you earn depends partly on how long you lock your money away. Longer terms usually pay higher rates because the bank keeps your money longer. A one-year CD might pay 4.5%, while a five-year CD might pay 5.2%—but you cannot touch the five-year money without paying a penalty.

Pick a term based on when you will actually need the money. If you are saving for a down payment in two years, buy a two-year CD. If you are stashing an emergency fund you hope never to touch, a five-year CD locks in a higher rate. If you are unsure, a six-month or one-year CD lets you reassess when it matures without locking in a low rate for years.

Some people buy multiple CDs on different maturity dates—called a CD ladder—so that one matures every few months. This spreads your money across different rates and gives you regular access to portions of it. For example, you might buy a one-year, two-year, and three-year CD with equal amounts, so one matures each year.

Understanding the deposit amount and minimum requirements

Most banks require a minimum deposit to open a CD, typically $500 to $2,500. Some online banks have no minimum or allow $100. Check your bank's website or call before you start, because you cannot complete the purchase if your deposit falls short of the minimum.

The amount you deposit is the principal—the base amount the interest rate applies to. If you deposit $5,000 at 4.75% for one year, you earn roughly $237.50 in interest (the exact amount depends on how the bank calculates daily interest). That interest is added to your account when the CD matures, and you receive the full amount: $5,237.50.

You can deposit as much as you want above the minimum. There is no upper limit on a single CD, though banks may have account limits. If you have $100,000 to deposit, you can put it all in one CD, or split it across multiple CDs at different banks to stay within Federal Deposit Insurance Corporation (FDIC) coverage limits of $250,000 per depositor per bank.

What happens when you buy: the confirmation and your CD agreement

After you confirm your purchase online or in person, the bank sends you a confirmation email or statement showing the CD details: the principal amount, the interest rate, the maturity date, and the early withdrawal penalty. Save this email or print the statement—you will need it to reference the terms later.

The money leaves your checking or savings account immediately and moves into the CD. You will see it listed separately in your account under "Certificates of Deposit" or "Term Deposits." The interest begins accruing on the maturity date you chose, not immediately. For example, if you buy a one-year CD on January 15, the interest accrues from January 15 of the following year.

Some banks automatically renew your CD when it matures—meaning they roll the principal and interest into a new CD at the current rate. Others require you to take action. Check your confirmation to see the renewal terms, or log into your account a few weeks before maturity to see your options. You can renew, withdraw the money, or move it to a different product.

Comparing rates before you buy

CD rates change daily based on what the Federal Reserve does with interest rates. A bank offering 4.75% today might offer 4.50% next week. Before you buy, spend five minutes checking what other banks are paying for the same term.

Use a rate comparison site like Bankrate, DepositAccounts, or your brokerage firm's CD search tool. These sites show current rates from dozens of banks, sorted by term length. You can see which banks pay the most for a three-month, one-year, or five-year CD without leaving the site. The difference between the highest and lowest rates for the same term can be 0.5% to 1%, which adds up significantly on large deposits.

Online banks typically pay higher rates than brick-and-mortar banks because they have lower overhead costs. If your current bank pays 3.5% for a one-year CD but an online bank pays 4.75%, the online bank is worth opening an account for. The process takes ten minutes, and you earn an extra $62.50 per year on a $5,000 deposit.

Early withdrawal penalties and what they cost you

If you need your money before the maturity date, you can withdraw it, but the bank charges an early withdrawal penalty. The penalty is usually expressed as a number of months of interest. A common penalty is three months of interest, meaning if your CD earns $100 in interest over the full term, you lose $25 if you withdraw early.

The penalty amount depends on the term length and the bank. A three-month CD might have a penalty of one month of interest. A five-year CD might have a penalty of six months of interest. The longer the term, the larger the penalty, because the bank loses more interest income if you leave early.

Before you buy, read the penalty terms in the fine print or ask the bank directly. Some banks publish the penalty clearly on the rate page; others bury it in the account agreement. If you think there is any chance you will need the money within the term, choose a shorter CD or keep the money in a high-yield savings account instead, where you can withdraw anytime without penalty.

FDIC insurance and protecting your deposit

Money in a CD at an FDIC-insured bank is protected up to $250,000 per depositor per bank. This means if the bank fails, the FDIC returns your principal and accrued interest up to $250,000. If you have more than $250,000 to deposit, split it across multiple banks to stay within the limit.

Credit unions offer similar protection through the National Credit Union Administration (NCUA), with the same $250,000 limit per member per institution. Brokerage firms do not insure CDs themselves, but the CDs they sell are issued by banks, so the FDIC coverage applies to the underlying bank.

Check whether your bank is FDIC-insured before you buy. The bank's website displays the FDIC logo, or you can search the FDIC's bank finder tool by bank name. If a bank is not insured, your money is at risk if the bank fails.

Frequently Asked Questions

Can I buy a CD with money from another bank?

Yes. You can transfer money from any bank account to the bank where you are opening the CD. Most banks let you link an external account and transfer funds electronically, which takes one to three business days. You can also deposit a check or wire money if the bank offers those options.

What is the difference between buying a CD at a bank versus a brokerage?

Banks sell their own CDs; brokerages sell CDs from many banks. At a bank, you see only that bank's rates. At a brokerage, you compare hundreds of banks in one place and buy whichever pays the most. Brokerage CDs may have slightly different terms—some allow early withdrawal without penalty, for example—but the FDIC insurance is the same.

Do I have to buy a CD in person, or can I do it entirely online?

Most banks let you buy a CD entirely online if you already have an account with them. If you do not have an account, you may need to open one first, which can be done online at most banks. Some smaller banks or credit unions still require a phone call or in-person visit, so check your institution's website.

What happens to my interest if I withdraw early?

You lose part of the interest you would have earned. The penalty is usually several months of interest, depending on the term and the bank. In some cases, the penalty is large enough that you end up with less money than you deposited. Always read the penalty terms before you buy.

Can I add more money to a CD after I buy it?

Most banks do not allow you to add money to an existing CD. You would need to open a separate CD with the additional funds. Some banks offer "add-on CDs" that let you deposit more during the term, but these are less common. Ask your bank whether this option is available.