The basic steps to buy a CD

Buying a CD means choosing a bank or credit union, picking a term length and interest rate, depositing your money, and waiting for it to mature. You do not need a financial advisor or special paperwork — most CDs open in 15 minutes online or at a branch. The main decision is whether to buy from your current bank, shop around for a better rate, or use a brokerage or online bank that may offer higher yields.

The process differs slightly depending on where you buy. A local bank branch requires you to visit in person with an ID and a check or cash. An online bank lets you fund the CD from another account you own, usually within one to three business days. A brokerage CD works the same way but may offer more term options and sometimes better rates than traditional banks.

Key Takeaways

  • You can buy a CD at any bank, credit union, or brokerage by choosing a term length, depositing money, and waiting until maturity to withdraw it with interest.
  • Online banks and brokerages often pay higher interest rates than local branches, so comparing rates across at least three providers takes 10 minutes and can earn you hundreds of dollars more.
  • Funding a CD online requires a linked bank account; funding at a branch requires an ID and cash or a check.
  • The CD is locked until the maturity date — withdrawing early usually costs you some or all of the interest you earned, so only deposit money you will not need.

Where to buy a CD and what each option costs

Your current bank is the easiest choice but rarely the best rate. Most large national banks (Chase, Bank of America, Wells Fargo) pay between 4% and 5% annual interest on a one-year CD, depending on the month. Credit unions often pay slightly more — typically 4.5% to 5.5% — and may have lower minimum deposits.

Online banks and online-only divisions of traditional banks pay significantly more. Online banks like Marcus, Ally, and American Express Personal Savings offer rates between 4.75% and 5.35% on one-year CDs, with some offering 5.5% or higher on longer terms. The catch is that you cannot walk in with cash; you must fund the CD from a bank account you already own.

Brokerages like Fidelity, Charles Schwab, and Vanguard sell CDs issued by multiple banks and credit unions, so you can compare hundreds of rates in one place. Brokerage CDs often pay the highest rates available and let you sell before maturity on the secondary market (though the price may be lower than what you paid). The trade-off is that brokerage accounts have a learning curve if you have never used one.

How to compare rates and choose a term

Rates change weekly, sometimes daily. Before you buy, check at least three sources: your current bank's website, one online bank (Marcus, Ally, or American Express), and one brokerage (Fidelity or Schwab). Write down the rate, the term length, and the minimum deposit for each. The difference between a 4.5% CD and a 5.3% CD on $10,000 for one year is about $80 in extra interest — worth 15 minutes of shopping.

Term length is your second choice. A three-month CD locks your money for 13 weeks; a five-year CD locks it for 260 weeks. Longer terms usually pay higher rates because the bank keeps your money longer. If you think interest rates will fall, a longer term locks in the current rate. If you think rates will rise, a shorter term lets you reinvest at a higher rate sooner. Most people choose one-year or two-year CDs as a middle ground.

Check the early withdrawal penalty before you buy. Most banks charge a penalty equal to three to six months of interest if you withdraw before maturity. On a $10,000 CD at 5% for one year, a six-month penalty costs you $250. Some online banks charge less (one to three months of interest); a few charge none, but their rates are usually lower to offset that.

Opening a CD online

If you choose an online bank or brokerage, the process is nearly identical. Go to the bank's website, click "Open a CD" or "Buy a CD", and enter the amount you want to deposit and the term you want. The site will show you the interest rate and the maturity date. You will need your Social Security number, date of birth, and address.

Next, link a bank account to fund the CD. The bank will ask for your routing number and account number (found on a check or your online banking portal). Most online banks verify the account by depositing two small amounts (usually under $1 each) into your account within one to three business days. You confirm the amounts on the bank's website, and the link is complete. Then the bank pulls the CD deposit from that account.

Some online banks skip the verification step and pull the money immediately if you have a high credit score or an existing account with them. Others require you to wait until the linked account is verified before the CD funds. Check the bank's website for timing — it usually says "Your CD will be funded by [date]."

Opening a CD at a branch

If you prefer to buy in person, bring a government-issued ID (driver's license or passport) and either cash or a check. Tell the teller you want to open a CD, and they will ask you the term length and the amount. They will show you the current rate, calculate your maturity date and interest, and have you sign the CD agreement.

The teller will either take cash directly or deposit your check into a temporary account, then move the money into the CD. The CD opens the same day. You will receive a receipt with the CD number, maturity date, interest rate, and early withdrawal penalty. Keep this receipt — you will need it to withdraw the money at maturity or to prove you own the CD if you lose the statement.

What happens after you buy the CD

Once the CD opens, you do nothing. The bank holds your money and pays interest according to the rate and term you chose. You cannot add money to the CD or withdraw it early without paying the penalty. Some banks let you set up automatic renewal — the CD automatically rolls into a new CD at the current rate when it matures — but you can also let it mature and withdraw the money without renewing.

On the maturity date, the bank deposits the original amount plus all the interest into your linked bank account (if you bought online) or into a savings or checking account at the bank (if you bought at a branch). You can then withdraw the money, spend it, or buy another CD. The bank will send you a 1099-INT form in January if the interest was $10 or more, which you will need for your taxes.

Common mistakes to avoid

The biggest mistake is buying from your current bank without checking other rates. A 0.5% difference sounds small, but on $25,000 for two years, it costs you $250 in lost interest. Spend 15 minutes comparing before you commit.

The second mistake is choosing a term that is too long. If you lock $10,000 into a five-year CD and need the money in two years, the early withdrawal penalty will eat into your gains. Only buy a CD with money you genuinely will not need until maturity.

The third mistake is forgetting to renew or withdraw at maturity. If your CD auto-renews and rates have fallen, you are locked in at a lower rate for another term. If it matures and you do nothing, the money sits in a low-interest account. Set a calendar reminder for two weeks before maturity so you can decide whether to renew or move the money.

Frequently Asked Questions

Can I buy a CD with money from another CD that is about to mature?

Yes. When your first CD matures, the bank deposits the money into a linked account. You can then use that money to open a new CD at the same bank or transfer it to a different bank and open a CD there. There is no waiting period or penalty for moving money between CDs at different institutions.

What is the difference between a brokerage CD and a bank CD?

A brokerage CD is issued by a bank but sold through a brokerage like Fidelity. You own it in your brokerage account, so you can sell it before maturity on the secondary market — but the price may be higher or lower than what you paid. A bank CD cannot be sold; you can only hold it until maturity or withdraw early and pay a penalty.

Do I need a minimum amount of money to buy a CD?

Most banks require a minimum deposit, usually $500 to $2,500, though some online banks have no minimum. Credit unions often have lower minimums. Check the bank's website before you start the process — it will list the minimum for each term.

Is my money safe in a CD?

Yes, if the bank is insured by the FDIC (Federal Deposit Insurance Corporation). Most banks are. The FDIC protects up to $250,000 per account holder per bank, so if the bank fails, you get your money back. Check the bank's website for the FDIC logo or search the FDIC's Bank Find tool to confirm.

What happens if I need my money before the CD matures?

You can withdraw it, but you will pay an early withdrawal penalty — usually three to six months of interest. On a $10,000 CD at 5% for one year, withdrawing after six months costs you roughly $250 in penalties and lost interest. Only buy a CD if you are confident you will not need the money until maturity.