Opening a CD account takes about 15 minutes online or in person, and you'll need an initial deposit, a valid ID, and a Social Security number or tax ID
A CD (certificate of deposit) is a savings account where you agree to leave money untouched for a set period—usually three months to five years—in exchange for a fixed interest rate. The process to open one is straightforward: you pick a bank or credit union, choose your term length and deposit amount, provide identification, and fund the account. Most banks let you do this entirely online without visiting a branch.
The speed and ease depend on where you open it. Online banks typically complete the process in minutes. Credit unions and traditional banks may take a day or two to verify your information. The key difference is that once your money is in the CD, you cannot withdraw it before the maturity date without paying an early withdrawal penalty—so make sure you are comfortable locking away that amount for the full term.
Key Takeaways
- You will need a government-issued ID, Social Security number or tax ID, and an initial deposit amount before you start.
- Online banks usually open CDs in minutes; traditional banks and credit unions may take one to three business days.
- The interest rate is locked in when you open the account and does not change, even if rates rise or fall.
- Withdrawing money before the maturity date triggers a penalty that reduces your earnings, so only deposit money you will not need.
Gather your documents and information before you begin
Before you contact a bank or credit union, have these items ready: a government-issued photo ID (driver's license, passport, or state ID), your Social Security number or Individual Taxpayer Identification Number (ITIN), and the amount you plan to deposit. If you are opening a CD in someone else's name or as a joint account, you will need their ID and tax ID as well.
You should also decide how long you want to lock your money away. Most banks offer terms of three months, six months, one year, two years, three years, and five years. Longer terms usually pay higher interest rates, but your money is tied up longer. Write down the term length you are considering so you can compare rates across banks without getting distracted.
Choose between online banks, traditional banks, and credit unions
Online banks typically offer the highest interest rates because they have lower overhead costs. They let you open a CD entirely on your computer or phone, and the process usually takes 10 to 15 minutes. You will fund the account by linking a bank account or transferring money electronically. Examples include Marcus by Goldman Sachs, Ally Bank, and American Express Personal Savings, though rates and terms vary by institution.
Traditional banks (Chase, Bank of America, Wells Fargo) offer lower rates but may be more convenient if you already have an account there or prefer to work in person. Credit unions often fall between the two—rates better than big banks but sometimes lower than online-only institutions. You can compare current rates on financial websites, but remember that rates change frequently, so check the rate the day you plan to open the account.
Complete the application with your personal and financial information
Whether you apply online or in person, you will enter your name, address, date of birth, Social Security number, and employment information. The bank will ask how much you want to deposit and which term length you want. Some banks ask whether this is a personal account, joint account, or account held in trust—choose the structure that matches your situation.
You may also be asked about the source of the funds (your paycheck, a savings account, an inheritance). This is standard anti-money-laundering verification, not a judgment about where your money comes from. Answer honestly. If you are depositing a very large amount, the bank may ask follow-up questions, but this does not delay the process significantly.
Fund your account and confirm your CD terms
Once your application is submitted, the bank will ask you to transfer your initial deposit. Online banks usually let you link an external bank account and move money immediately or within one to two business days. Some banks require a minimum deposit—commonly $500 to $2,500, though this varies. Check the bank's minimum before you apply so you are not surprised.
Before you confirm, review the maturity date (when your CD ends), the interest rate, the annual percentage yield (APY), and the early withdrawal penalty. The penalty is usually a certain number of months of interest—for example, three months of interest on a one-year CD. Write down the maturity date in your calendar so you know when your money becomes available again without penalty.
Understand what happens when your CD matures
When your CD reaches its maturity date, the bank will notify you (usually by email or mail) that your money is available. At that point, you have a few options: withdraw the money, move it to a savings account, or roll it into a new CD. Most banks have a grace period—typically seven to ten days—during which you can decide what to do without penalty.
If you do nothing and the grace period passes, many banks automatically renew your CD at the current rate for the same term length. This can work in your favor if rates have risen, but it locks your money away again. Read the bank's renewal policy before your maturity date so you are not caught off guard.
Know the early withdrawal penalty and when it applies
If you need to withdraw money before the maturity date, the bank will subtract a penalty from your earnings. The penalty amount depends on the term length and the bank—a three-month CD might have a penalty of one month of interest, while a five-year CD might have a penalty of six months or more. Some banks calculate the penalty differently, so ask the bank to show you the exact penalty in dollars before you open the account.
The penalty comes out of your interest earnings first. If your earnings are not enough to cover the penalty, the bank takes the difference from your principal (the amount you deposited). This means you could end up with less money than you started with. For this reason, only deposit money in a CD if you are confident you will not need it before maturity.
Frequently Asked Questions
Can I open a CD with money from another bank?
Yes. Most online banks let you link an external account and transfer money electronically. Traditional banks may require you to bring a check or wire the funds. The transfer usually takes one to three business days, so plan ahead if you want to lock in a rate on a specific day.
What is the difference between APY and interest rate?
The interest rate is the percentage the bank pays on your money. APY (annual percentage yield) includes the effect of compounding—how often the bank adds interest to your account. APY is always equal to or higher than the interest rate. Compare APY across banks, not the interest rate, to see which CD actually pays more.
Can I add money to my CD after I open it?
No. Once a CD is open, you cannot deposit additional money into it. If you want to add to your savings, you would need to open a second CD or use a regular savings account. Some banks let you open multiple CDs at the same time if you want to spread your money across different term lengths.
What happens if the bank fails?
Your CD is protected by the FDIC (Federal Deposit Insurance Corporation) up to $250,000 per account holder per bank. If the bank fails, the FDIC guarantees you will get your money back, including accrued interest up to the maturity date. Credit unions are protected by the NCUA (National Credit Union Administration) with the same $250,000 limit.
Can I move my CD to a different bank before it matures?
You can withdraw the money and move it, but you will pay the early withdrawal penalty. Some banks offer CD transfers or rollovers to other institutions, but this is rare and usually still triggers a penalty. It is usually cheaper to wait until maturity unless rates have risen dramatically and you plan to open a much higher-paying CD elsewhere.