What is the minimum deposit for a CD?
What Is the Minimum Deposit for a CD? Minimum deposits vary based on account and financial institution, but a required deposit of around $500 to $1,000 is typical when opening a CD. However, it is possible to find CDs with no minimum deposit requirement.
Most CD accounts require a minimum of $500 to $2,500 to open an account, although some have no minimum deposit requirements. A major difference between CDs and regular savings accounts is that if you withdraw cash from a CD before it reaches its maturity date, you'll typically pay a penalty.
Top Nationwide Rate (APY) | Balance at Maturity | |
---|---|---|
1 year | 6.18% | $ 10,618 |
18 months | 5.80% | $ 10,887 |
2 year | 5.60% | $ 11,151 |
3 year | 5.50% | $ 11,742 |
The interest rate is determined ahead of time and your deposit may be insured up to $250,000, similar to a regular checking or savings account. Minimum amounts to open an account vary based on the CD duration, and are as low as $100. Interest rates for CD accounts are higher than money market and checking accounts.
Plus, you can often earn more in a six-month CD than you would in a high-yield savings account. Six-month CDs are worth it if you know you need to make a major purchase within the year and want to earn as much interest as possible on your money without putting it at risk.
Along with savings accounts and money market accounts, CDs are some of the safest places to keep your money. That's because money held in a CD is insured.
Minimum and maximum amounts for CD investments
You can expect a minimum CD opening deposit of at least $500 at most banks, though that could rise to $2,500 or more for certain accounts. For example, CIT's Jumbo CDs require a minimum balance of $100,000. CDs with higher minimums often pay higher APYs.
The bottom line
If you put $10,000 in a 5-year CD right now, you'd earn more than $2,600 in interest by the end of the term. That's a significant bit of interest, and what's better is that it comes with virtually no risk.
CDs can help accelerate your savings, but they're not always worth it. If there's a chance you'll need access to your money during your CD's term, consider a high-yield savings account or money market account. But if you have a pool of money you can afford to lock up, it may be worth capitalizing on high CD rates.
With such high interest rates, the earnings on CDs are impressive. You'll earn $850.50 for a total of $15,850.50 after one year when you open a $15,000 1-year CD with Popular Direct when calculating the returns at current rates.
What are 2 drawbacks of putting your money in a CD?
CDs offer higher interest rates than traditional savings accounts, guaranteed returns and a safe place to keep your money. But it can be costly to withdraw funds early, and CDs have less long-term earning potential than certain other investments.
A one-year CD typically offers a higher interest rate than shorter-term CDs, such as three-month CDs and six-month CDs. Offers higher interest rates than traditional savings accounts.
Are CDs safe if the market crashes? Putting your money in a CD doesn't involve putting your money in the stock market. Instead, it's in a financial institution, like a bank or credit union. So, in the event of a market crash, your CD account will not be impacted or lose value.
Even if an individual owner rolls over a CD at its maturity into a new CD, the owner must pay income tax on the income the CD owner is entitled to receive at that time.
A certificate of deposit (CD) is a product that offers an interest rate payment in exchange for the customer agreeing to leave the lump-sum investment with a bank for a specific period of time. Standard CDs are insured by the Federal Deposit Insurance Corp. (FDIC) for up to $250,000, so they cannot lose money.
While longer-term CDs may tie up your funds for years, a 6-month CD allows you to access your money relatively quickly. If you suddenly need your $5,000 for an emergency or a more lucrative investment opportunity arises, you won't have to wait years to access your funds without incurring hefty penalties.
Inflation erodes the purchasing power of your money over time, and if your CD's interest rate isn't keeping up with inflation, you're essentially losing money. For example, if your CD earns a 2% annualized return but inflation is running at 3%, you're actually losing 1% of your purchasing power every year.
That all said, here's how much a $1,000 CD will make in a year, based on four possible interest rate scenarios: At 6.00%: $60 (for a total of $1,060 total after one year) At 5.75%: $57.50 (for a total of $1,057.50 total after one year)
CD accounts may offer better interest rates than savings accounts. Longer terms will usually also have more favorable rates.
Many banks and credit unions charge fees for opening and maintaining CD accounts, which can cut into your earnings. These include early withdrawal fees, monthly maintenance fees and broker fees. Fortunately, you can avoid these fees with a little know-how.
Is it better to have one CD or multiple?
Having multiple CDs can be a great way to diversify your portfolio without sacrificing as much liquidity. Risk is low, and CDs provide steady returns. Just know that owning too many CDs could cut you off from other high-return investments. Investing is one part of the financial journey.
Financial institution (click to read our review) | Grace period for CDs (starting after the maturity date) |
---|---|
Bank of America | 7 days. |
Capital One | 10 days. |
Chase | 10 days. |
Discover Bank | 9 days. |
The biggest disadvantage of investing in CDs is that, unlike a traditional savings account, CDs aren't flexible. Once you decide on the term of the CD, whether it's six months or 18 months, it can't be changed after the account is funded.
That said, here's how much you could expect to make by depositing $20,000 into a one-year CD now, broken down by four readily available interest rates (interest compounding annually): At 6.00%: $1,200 (for a total of $21,200 after one year) At 5.75%: $1,150 (for a total of $21,150 after one year)
As part of a portfolio that includes cash, CDs can provide stability and security. However, CDs are unlikely to provide you with the returns you need to build wealth for the future or live off the interest — unless you already have a large amount of money and ladder your CDs to avoid penalties.
References
- https://www.sec.gov/Archives/edgar/data/1818382/000181838222000014/R8.htm
- https://www.investopedia.com/cds-vs-stocks-5225343
- https://www.capitalone.com/bank/money-management/banking-basics/certificate-of-deposit-advantages-and-disadvantages/
- https://www.discover.com/online-banking/banking-topics/ira-cds-vs-ira-savings-accounts/
- https://www.investopedia.com/how-does-a-cd-account-work-5235792
- https://www.law.cornell.edu/ucc/3/3-104
- https://www.investopedia.com/what-can-i-earn-with-10k-in-a-cd-8400034
- https://www.investopedia.com/terms/c/certificateofdeposit.asp
- https://www.nerdwallet.com/article/banking/cd-certificate-of-deposit
- https://www.sofi.com/learn/content/can-a-certificate-of-deposit-cd-lose-value/
- https://www.investopedia.com/what-happens-to-your-cd-if-your-bank-fails-7511009
- https://www.communityfirstfl.org/resources/blog/how-does-a-certificate-of-deposit-work
- https://www.businessinsider.com/personal-finance/how-much-will-5000-cd-make-in-a-year
- https://www.experian.com/blogs/ask-experian/minimum-deposit-to-open-cd/
- https://www.fool.com/the-ascent/banks/where-put-money-recession/
- https://www.forbes.com/advisor/banking/cds/how-much-money-to-put-in-a-cd/
- https://www.investopedia.com/pros-and-cons-of-cds-5223947
- https://www.bankrate.com/banking/cds/how-do-cds-work/
- https://www.bankrate.com/banking/cds/the-pros-and-cons-of-cd-investing/
- https://fortune.com/recommends/investing/pros-and-cons-of-certificates-of-deposit/
- https://www.cbsnews.com/news/why-you-should-put-5000-in-a-6-month-cd-now/
- https://www.experian.com/blogs/ask-experian/how-many-cds-can-you-have/
- https://www.nerdwallet.com/article/banking/when-your-cd-matures
- https://www.cnn.com/cnn-underscored/money/6-percent-cd-rates
- https://fortune.com/recommends/banking/cds-vs-money-market-accounts/
- https://www.cbsnews.com/news/how-to-avoid-cd-fees/
- https://money.com/money-market-vs-cd/
- https://www.cbsnews.com/news/how-much-will-a-20000-cd-make-in-a-year/
- https://www.investopedia.com/how-many-cds-can-i-have-5248694
- https://www.cbsnews.com/news/can-you-lose-money-in-a-cd/
- https://www.bankrate.com/banking/cds/what-is-a-cd/
- https://hbr.org/2022/11/how-to-manage-your-money-during-a-recession
- https://www.marketplace.org/2023/03/27/why-cds-are-music-to-banks-ears-right-now/
- https://www.investopedia.com/do-cds-pay-compound-interest-5248340
- https://www.bankrate.com/banking/savings/money-market-vs-savings-accounts-vs-cds/
- https://www.experian.com/blogs/ask-experian/does-opening-cd-hurt-your-credit/
- https://www.forbes.com/advisor/banking/cds/are-cds-worth-it/
- https://www.cnn.com/cnn-underscored/money/are-cds-taxable
- https://www.cbtcares.com/personal/certificates-of-deposit/
- https://time.com/personal-finance/article/are-cds-taxable/
- https://www.bankrate.com/banking/cds/are-cds-worth-it-right-now/
- https://www.investopedia.com/what-can-cds-be-used-for-5235790
- https://bic.nd.edu/instrumentation/cd/
- https://www.cbsnews.com/news/how-much-does-1000-cd-make-in-a-year/
- https://www.cbsnews.com/news/why-you-should-put-10000-into-a-short-term-cd-right-away/
- https://www.forbes.com/advisor/banking/savings/7-percent-interest-savings-account/
- https://www.marketwatch.com/picks/cd-vs-savings-account-which-should-i-choose-6cc7169d
- https://www.nationwide.com/lc/resources/personal-finance/articles/types-of-assets
- https://www.cbsnews.com/news/why-you-should-deposit-10000-into-a-5-year-cd-now/
- https://www.fool.com/the-ascent/banks/articles/yes-you-can-lose-money-in-a-cd-heres-how/
- https://www.forbes.com/advisor/banking/pros-and-cons-of-using-a-certificate-of-deposit-cd-for-your-savings/
- https://www.cbsnews.com/news/why-you-should-put-15000-into-a-1-year-cd-now/
- https://www.bankrate.com/investing/4-ways-to-get-better-returns-than-cds/
- https://www.nasdaq.com/articles/can-you-transfer-your-401k-to-a-cd-how-to-avoid-penalties
- https://www.ncbi.nlm.nih.gov/pmc/articles/PMC2728378/
- https://www.financestrategists.com/banking/negotiable-instrument/
- https://www.businessinsider.com/personal-finance/financial-advisor-cds-bad-place-keep-savings-2023-1
- https://fortune.com/recommends/banking/should-you-open-certificate-of-deposit-now-or-wait/
- https://www.bankrate.com/banking/cds/paying-tax-on-cd-interest/
- https://www.cnn.com/cnn-underscored/money/pros-and-cons-of-cds
- https://www.cbsnews.com/news/why-you-should-put-20000-into-a-5-year-cd-now/
- https://www.chase.com/personal/banking/education/budgeting-saving/cd-vs-savings-account
- https://www.fool.com/the-ascent/banks/articles/heres-why-nows-a-good-time-to-lock-in-a-long-term-cd/
- https://corporatefinanceinstitute.com/resources/wealth-management/certificate-of-deposit-cd/
- https://www.investopedia.com/ask/answers/060616/can-certificates-deposit-cds-lose-value.asp
- https://www.forbes.com/advisor/banking/cds/best-1-year-cd-rates/
- https://www.cnn.com/cnn-underscored/money/how-much-money-should-i-keep-in-a-cd
- https://www.experian.com/blogs/ask-experian/pros-cons-cds/
- https://fortune.com/recommends/banking/cds-vs-traditional-savings-accounts/
- https://www.consumerfinance.gov/ask-cfpb/what-is-a-certificate-of-deposit-cd-en-917/
- https://www.forbes.com/advisor/banking/cds/cd-rate-forecast/
- https://www.investopedia.com/best-1-year-cd-rates-4796650
- https://www.forbes.com/advisor/banking/cds/are-cds-taxable/
- https://www.nerdwallet.com/article/banking/are-cds-safe
- https://www.forbes.com/advisor/banking/cds/best-6-month-cd-rates/
- https://www.helpwithmybank.gov/help-topics/bank-accounts/certificates-of-deposit/cd-interest-after-mature.html
- https://www.nerdwallet.com/article/banking/short-term-or-long-term-cds