The basic steps to buy a CD

To buy a CD, you pick a bank or credit union, choose how long you want to lock your money away, and complete a short form with your personal information and the amount you want to deposit. The bank then holds your money at a fixed interest rate for the term you selected—typically three months to five years—and you cannot withdraw it without paying an early withdrawal penalty. The whole process usually takes less than an hour if you do it online, or about 15 minutes in person at a branch.

You do not need to be an existing customer of the bank to open a CD there. You will need a valid ID, your Social Security number, and the cash or a way to transfer funds. Some banks let you fund a CD from another bank account on the same day; others require you to mail a check or visit in person.

Key Takeaways

  • You can buy a CD at any bank or credit union by providing your ID, Social Security number, and the amount you want to deposit.
  • The interest rate is locked in when you open the CD, so compare rates across multiple banks before you commit—rates vary significantly even for the same term length.
  • You choose the term length (how long your money stays locked) when you open the CD, and early withdrawal usually costs you some or all of the interest you earned.
  • CDs are insured up to $250,000 per depositor per bank by the FDIC, so your principal is protected even if the bank fails.

Where to buy a CD

You can buy a CD at a traditional bank, an online bank, or a credit union. Traditional banks (Bank of America, Wells Fargo, Chase) usually offer lower rates but let you walk into a branch if you have questions. Online banks (Marcus, Ally, Discover) typically pay higher rates because they have lower overhead, but you handle everything by phone or computer. Credit unions often fall somewhere in between on rates and may require you to be a member first.

The rate you get depends on the bank you choose and the term length you pick, not on how much money you deposit (though some banks offer slightly higher rates for larger deposits). A six-month CD at one bank might pay 4.50%, while the same term at another bank pays 5.25%. This difference matters: on a $10,000 deposit, that 0.75% gap means $75 more in your pocket over six months. Check at least three banks before you decide.

How to compare CD rates and terms

Start by listing the term lengths you are considering—three months, six months, one year, two years, five years. Then visit the websites of at least three banks and write down the rate each one offers for each term. Most banks show their current rates on the homepage or in a rates section; you do not have to call or fill out a form to see them.

Pay attention to whether the rate is fixed (stays the same for the whole term) or variable (can change). Nearly all CDs sold to individuals are fixed-rate, which means your rate is locked in on day one. Also check the early withdrawal penalty—banks are required to disclose this, usually in the fine print or a separate document. A typical penalty is three months of interest, but some banks charge six months or a flat fee. If you think you might need the money before the term ends, a lower penalty matters more than a slightly higher rate.

What information you need to provide

When you open a CD, the bank will ask for your full legal name, date of birth, Social Security number, address, phone number, and email. If you are opening the CD in person, bring a government-issued ID (driver's license or passport). If you are opening it online, you will upload a photo of your ID or answer security questions to verify your identity.

You will also need to decide how you want to fund the CD. Most banks let you transfer money from another bank account, which usually takes one to three business days. Some online banks let you fund immediately if you use a debit card. A few banks still require you to mail a check, which takes longer. Ask the bank which methods they accept before you start the process.

The difference between opening a CD online and in person

Opening a CD online is faster and you can do it at any time, but you cannot ask questions face-to-face and you have to wait for the money to transfer. Opening a CD in person at a branch takes longer (you might wait in line) but you can ask the banker questions on the spot and sometimes fund it immediately with cash or a check.

Online banks almost always have higher rates than brick-and-mortar banks, so if you are comfortable with the online process, you will usually earn more interest. If you value the ability to walk into a branch and talk to someone, you will pay a bit for that convenience. Neither choice is wrong—it depends on what matters to you.

What happens after you buy the CD

Once your CD is open, the bank holds your money and pays you interest. You will receive a statement showing the CD's term end date, the interest rate, and the amount you deposited. Some banks pay interest monthly, some quarterly, and some only at maturity (when the term ends). The interest either goes into a linked savings account or gets added to the CD itself.

When the term ends, the bank will either automatically renew the CD at the current rate (which may be higher or lower than your original rate) or move the money to a savings account. Check your CD's terms to see what your bank does. If you do not want to renew, you can withdraw the money without penalty once the term ends. If you withdraw before the term ends, you will owe the early withdrawal penalty.

FDIC insurance and safety

CDs at FDIC-insured banks are protected up to $250,000 per depositor per bank. This means if the bank fails, the federal government guarantees you will get your money back, up to that limit. If you have $250,000 or more to deposit, you can split it across multiple banks to keep the full amount insured.

Credit unions use a similar system called NCUA insurance, which also covers up to $250,000 per depositor per institution. As long as you buy your CD from an FDIC-insured bank or NCUA-insured credit union, your principal is safe even if the institution goes under. You can check whether a bank is FDIC-insured by searching the FDIC's Bank Find tool on their website.

Frequently Asked Questions

Can I withdraw money from a CD before it matures?

Yes, but you will pay an early withdrawal penalty. The penalty varies by bank and term length—it might be three months of interest, six months of interest, or a flat fee. Some banks charge more for longer terms. Read the penalty terms before you open the CD so you know what it will cost if you need the money early.

What is the difference between a CD and a savings account?

A CD locks your money for a set term and pays a higher interest rate in exchange. A savings account lets you withdraw money anytime without penalty but pays a lower rate. If you know you will not need the money for a few months or longer, a CD usually pays more. If you might need it sooner, a savings account is more flexible.

Do I have to open a CD at a bank where I already have an account?

No. You can open a CD at any bank or credit union, even if you have never done business with them before. You do not need an existing checking or savings account. Many people shop around and open CDs at whichever banks offer the best rates.

What happens to my CD when the term ends?

The bank will either automatically renew it at the current rate or move the money to a savings account, depending on the bank's policy. Check your CD agreement to see what yours does. If you do not want to renew, you can withdraw the money without penalty once the term ends.

Can I add money to a CD after I open it?

Most banks do not let you add money to an existing CD. You would have to open a new CD with the additional funds. Some banks offer "add-on CDs" that let you deposit more during the term, but these are less common and may have different terms.