Overview
Learn how to choose the right certificate of deposit. Our guide covers term lengths, rates, penalties, and CD laddering strategies. Finding the right option depends on your specific needs, spending habits, and financial goals. Below we break down the key factors to consider and the top choices available.
Step 1 — Decide Your Timeline
Only deposit money you genuinely won't need until maturity. Emergency funds belong in liquid savings, not CDs, since early withdrawal typically forfeits 60-180 days of interest.
Step 2 — Compare APY Across Terms
Don't assume longer terms always pay more — compare actual current rates across the specific terms you're considering, since the relationship between term length and rate shifts with market conditions.
Step 3 — Consider a CD Ladder
Rather than locking all your savings into one term, spread deposits across multiple terms (6-month, 1-year, 2-year). This gives you regular access to some funds while still earning competitive rates on the rest.
Step 4 — Check the Minimum Deposit
Some banks (Discover) require a minimum deposit like $2,500, while others (Marcus, Ally) have no minimum — confirm you can meet any requirement before committing to a specific provider.
Step 5 — Understand the Early Withdrawal Penalty
Before opening any CD, know exactly what penalty applies if you need funds early — typically 60-180 days of interest depending on the term length and bank.
Frequently Asked Questions
Only funds you're confident you won't need before maturity — after ensuring you have an adequate separate emergency fund in a liquid account. A CD ladder can help balance earning a competitive rate with maintaining some access to funds.
Most banks give a short grace period (often 7-10 days) after maturity to decide whether to withdraw or renew. If you take no action, many banks automatically roll your funds into a new CD term at the current rate — set a reminder for your maturity date to compare rates before that happens.