Banks, credit unions, and online brokers all offer CDs, and the rate you earn depends heavily on which one you choose

You can open a CD at a traditional bank, a credit union, or an online bank or brokerage. Each type of institution offers different rates, terms, and account features. The highest rates are almost always at online banks and brokerages, because they have lower overhead costs. Traditional brick-and-mortar banks typically offer lower rates but may give you face-to-face service. Credit unions often fall in the middle and may offer slightly better rates to members than banks do.

The CD itself works the same way regardless of where you open it: you deposit money for a fixed term, earn a set interest rate, and cannot withdraw without penalty until the term ends. The difference is in how much interest you actually earn and what happens to your money if the institution fails.

Key Takeaways

  • Online banks and brokerages consistently offer the highest CD rates because they operate with lower costs than physical branches.
  • All deposits at FDIC-insured banks and NCUA-insured credit unions are protected up to $250,000 per account owner, regardless of the rate.
  • You can compare rates across institutions on sites like Bankrate, DepositAccounts, or the Federal Reserve's rate tracker before opening an account.
  • Credit unions may require membership in a specific group or organization, but some allow anyone to join for a small fee.
  • Brokered CDs let you buy individual CDs from multiple banks through one brokerage account, but they carry different early-withdrawal rules than bank CDs.

Online banks offer the highest rates but no in-person support

Online banks such as Marcus, Ally, American Express Personal Savings, and Discover have no physical branches, so they pass savings to depositors through higher CD rates. These banks are FDIC-insured, meaning your money is protected up to $250,000 if the bank fails. You manage your account entirely through a website or mobile app.

The trade-off is that you cannot walk into a location to deposit cash or speak to someone in person. Most online banks accept transfers from other accounts and allow you to fund a CD by electronic transfer. If you need to withdraw early, online banks typically charge a penalty that reduces your interest earnings — the amount varies by bank and CD term.

Traditional banks offer lower rates and physical locations

Banks like Chase, Bank of America, Wells Fargo, and regional banks have branches where you can deposit cash and speak to a banker. Their CD rates are usually lower than online banks because they maintain physical locations and staff. These banks are also FDIC-insured.

If you already have a checking or savings account at a traditional bank, opening a CD there is straightforward — you can often do it in person or online. Some banks offer slightly higher rates to existing customers or for larger deposits. Early-withdrawal penalties vary by bank and term length.

Credit unions may offer competitive rates to members

Credit unions are member-owned financial institutions that sometimes offer CD rates competitive with or better than traditional banks. Credit union deposits are insured by the National Credit Union Administration (NCUA) up to $250,000, the same protection as FDIC insurance. Many credit unions are part of shared branching networks, meaning you can conduct transactions at other credit unions' locations even if you do not have a local branch.

To open a CD at a credit union, you must become a member. Membership requirements vary — some credit unions serve only employees of a specific company, residents of a certain area, or members of a particular organization. Others allow anyone to join for a small fee, often $5 to $25. Once you are a member, you can open a CD online or in person.

Brokered CDs let you hold multiple CDs in one account

A brokerage firm such as Fidelity, Charles Schwab, or Vanguard can sell you CDs issued by different banks. Instead of opening separate accounts at each bank, you hold all your CDs in one brokerage account. This simplifies record-keeping and makes it easier to compare rates across issuers.

Brokered CDs are FDIC-insured, but the insurance works differently than at a bank. Each CD is insured separately up to $250,000 based on the bank that issued it, not based on your total balance at the brokerage. If you own five $100,000 CDs from five different banks through one brokerage, each is fully insured.

The main drawback of brokered CDs is that early withdrawal works differently. If you need to cash out before maturity, you cannot simply ask the brokerage to break the CD — instead, the brokerage sells your CD on the secondary market. The price you receive depends on interest rate movements since you bought it. If rates have risen, you will receive less than you paid. If rates have fallen, you may receive more.

How to compare rates across institutions

Rate comparison sites like Bankrate, DepositAccounts, and the Federal Reserve's National Rate and Term CD Survey let you filter by CD term and see which institutions are offering the highest rates. These sites update rates daily or weekly. You can also visit individual bank websites directly to see their current rates.

When comparing, look at the Annual Percentage Yield (APY), not just the interest rate. APY accounts for how often interest is compounded and shows you the true return on your money. A CD with a 4.50% APY will earn more than one with a 4.50% rate if the second one compounds interest less frequently.

Check whether the rate is may provide for the full term or whether it can change. Most CDs lock in a fixed rate, but some institutions offer variable-rate CDs where the rate adjusts periodically. For a fixed-rate CD, the rate you see when you open the account is the rate you will earn for the entire term.

What to check before opening a CD anywhere

Before you open a CD, confirm that the institution is FDIC-insured (if it is a bank) or NCUA-insured (if it is a credit union). You can search the FDIC's Bank Find tool or the NCUA's Credit Union Locator to verify. This protects your deposit if the institution fails.

Read the early-withdrawal penalty terms. Some banks charge a flat fee; others charge a number of months' interest. A CD with a 3-month penalty means you lose three months of interest if you withdraw early. On a one-year CD earning 4% APY, that penalty is roughly $10 per $1,000 deposited. On a five-year CD, the same penalty is much steeper relative to the total interest you would earn.

Check the minimum deposit. Most CDs require $500 to $2,500 to open, but some online banks accept deposits as low as $100 or $1. A few institutions have no minimum.

Frequently Asked Questions

Can I move a CD from one bank to another without penalty?

No. A CD is a contract between you and the issuing bank. If you withdraw before the maturity date, you pay the early-withdrawal penalty. You cannot transfer a CD to another bank the way you can transfer a savings account. You must close it, pay the penalty, and open a new CD elsewhere.

Is my money safer at an online bank than a traditional bank?

No. Both online banks and traditional banks are FDIC-insured up to $250,000. The insurance protection is identical. The difference is convenience and rate, not safety. As long as the institution is FDIC or NCUA-insured, your deposit is protected equally.

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

You can withdraw it, but you will pay an early-withdrawal penalty. The penalty amount depends on the bank and the CD term. Some banks charge a flat fee; others charge a number of months' interest. With a brokered CD, you can sell it on the secondary market instead, but the price depends on current interest rates.

Do I need to have an existing account to open a CD?

Not usually. Most banks and credit unions let you open a CD without an existing account. You can fund it by electronic transfer from another bank. Some institutions offer slightly higher rates to existing customers, but you are not required to be one.

Which type of institution offers the best CD rates?

Online banks and brokerages consistently offer the highest rates because they have lower operating costs. Traditional banks and credit unions typically offer lower rates but may provide other benefits like in-person service or membership perks. The best choice depends on whether you prioritize the highest rate or prefer face-to-face banking.