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A CD Primer

Typically, the longer the CD term, the higher the interest rate you will receive.

CDs, or certificates of deposit, are one type of savings product to consider as you work toward your savings goals. To find out which CDs are right for you, learn the basics.

What is a CD?

Although a CD is a deposit account, in some ways a CD can be compared to a promissory note issued to you by a bank. You give the bank a set amount of money for a specified period of time. In return, you get your principal back with interest when the CD “matures.” Typically, the longer the CD term, the higher the interest rate you will receive—for example, a five-year CD will typically offer a higher interest rate than a 6-month CD. One important note: you may have to pay a penalty for withdrawing the principal from your CD before the term ends, which may reduce your principal amount.

Ready to invest in a CD? First, follow these steps:

Pick your term. Figure out how long you want to invest your cash, then, proceed accordingly. Some online banks, like Marcus, offer APY calculators so you can estimate how much you’ll earn over time. (APY means “annual percentage yield” and is the percentage earned on a deposit, taking into account compounding interest, assuming the funds remain untouched for the year.)

Pick your type. Some banks offer different types of CDs and CD interest rates to choose from. What might be right for your rainy-day fund might not be appropriate for some other savings goal. If you’re not sure, you could speak to a financial professional and the bank’s customer service agent to understand your options, and then select the CD term that best suits your personal needs.

Pick your rate. Shop around for CD interest rates, and keep in mind that online banks may offer higher interest rates than you'll find at brick-and-mortar institutions in your neighborhood.

Be smart. Make sure you conduct your CD business with an institution insured by the Federal Deposit Insurance Corporation (FDIC). For more information on FDIC insurance visit the FDIC website at If you’re not sure whether a bank is FDIC-insured, call and ask.

See how much interest you could earn with a Marcus high-yield CD

This article is for informational purposes only and is not a substitute for individualized professional advice. Individuals should consult their own tax advisor for matters specific to their own taxes and nothing communicated to you herein should be considered tax advice. This article was prepared by and approved by Marcus by Goldman Sachs, but does not reflect the institutional opinions of Goldman Sachs Bank USA, Goldman Sachs Group, Inc. or any of their affiliates, subsidiaries or division. Goldman Sachs Bank USA does not provide any financial, economic, legal, accounting, tax or other recommendation in this article. Information and opinions expressed in this article are as of the date of this material only and subject to change without notice.  Information contained in this article does not constitute the provision of investment advice by Goldman Sachs Bank USA or any its affiliates. Neither Goldman Sachs Bank USA nor any of its affiliates makes any representations or warranties, express or implied, as to the accuracy or completeness of the statements or any information contained in this document and any liability therefore is expressly disclaimed.