How to Choose the Right CD for You

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What we’ll cover:

A certificate of deposit or CD can be a great savings tool to help you reach your financial goals. Most CDs offer a higher interest rate for your deposits than a traditional savings account. 

They are also generally considered a safe place to park your cash because at the end of the term, you get back your principal (read: original deposit) plus the interest accrued. On top of this, the money you put into your CD account is also FDIC-insured (up to $250,000, per depositor, per bank, per category of account), so long as you open the account at a FDIC member bank. 

There are many types of CDs to choose from. Some of them sound more like dance moves than a savings tool: Ever heard of a “bump-up” or “step-up” CD? With so many options, how do you know which type of account is right for you? Read on – we’ve got some considerations that could help you make that decision.


The key is finding the option that best fits your financial situation and brings you closer to your financial goals.


CD terms and APYs

When it comes to choosing a CD product, one question you must first ask yourself is how long you’d like to keep your money in the account.

Figuring out what’s an appropriate CD term for your financial goals is important because many accounts can impose a withdrawal penalty if you take your money out before the CD matures.

Traditionally speaking, there are short-term, medium-term and long-term CDs, and they can range anywhere between a few months (e.g., 3 months) to a few years (e.g., 5 years). 

Once you know the timeframe you’re willing to commit to, you’re in a good position to compare interest rates across providers. Bear in mind that, typically, long-term CDs offer a higher APY than short-term CDs. 

To get a sense of whether the CD rates being offered to you are competitive, you can check in with the FDIC – the federal agency provides a weekly update of the national average rates for different types of savings accounts. A little research and comparison shopping can help ensure that you’re getting the best possible deal.

Benefits of different CDs options: It’s all about flexibility

There’s more to a CD than its rate and term: CDs include different features, benefits and rules. The key is finding the option that best fits your financial situation and brings you closer to your financial goals. 

For instance, if your primary goal is to earn a high APY, then a high-yield CD should be added to your list for consideration. High-yield CDs typically offer higher interest rates than regular CDs. But in exchange for better rates, you may have to deposit more money up front when you open the account: High-yield CDs usually come with a higher opening deposit requirement. 

Now, let’s say flexibility is most important to you when it comes to accessing your savings. And you’re willing to accept a lower interest rate as a tradeoff. Then you might want to consider a no-penalty CD, which allows you to withdraw your deposits after a certain time without having to face a penalty. Bear in mind though that when you need to withdraw the money, you usually have to withdraw the full amount.

In addition to those two examples, there are also bump-up CDs, step-up CDs, zero-coupon CDs and many more. Each has its own benefits and potential drawbacks, providing varying degrees of flexibility. Want to learn more? Check out this article where we discuss five common types of CDs.

Remember, at the end of the day, it’s all about what kind of flexibility you need when it comes to things like interest rates and liquidity (read: access to your money).

Minimum deposit requirements, withdrawal penalties and FDIC insurance

Once you know the type of CD you want, there’s a little more homework to do. It’s time to dig deeper and review other vital account information. These include details like minimum deposit requirements, account fees and whether or not your account is FDIC-insured, which all can vary across CD providers. For instance, while some providers have low minimum deposit requirements, others might require a sizeable lump-sum. 

Pay attention to any withdrawal penalties as well. As we mentioned earlier, in many cases, if you break a CD before the term ends, you will likely have to pay a penalty. If you can’t find the details on your own, don’t hesitate to ask questions. CD providers are required to disclose this information. 

Finally, FDIC insurance. Don’t forget to check this detail before you hand over your hard-earned savings. CDs are FDIC-insured, as long as you open your account at a FDIC member bank. 

Some parting words…

Opening a CD can be pretty straightforward. Generally, you need to figure out how much money you can afford to put away and for how long. And once you find a bank that offers a CD option and an interest rate to your liking, you can work with them to open an account. 

If you’re a newcomer to the world of CDs and interested in learning more, catch up on the basics in our Guide to CDs. A little more advanced? Then we have some CD strategies for you to consider as well – like CD ladders and CD barbells

When it comes to choosing the right financial tools for your needs, getting some foundational knowledge under your belt is essential. Happy reading!

Ready to lock in a fixed rate for a guaranteed return? Save with confidence when you open 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.