A certificate of deposit (CD) is a type of savings account that allows you to earn interest for a predetermined amount of time. When the term ends, you'll get back your initial deposit—plus interest. CDs are considered safe investments and can provide reliable returns.
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Annual percentage yield (APY)
APY represents how much interest you will earn over the course of a year on your savings. The higher the APY, the more your money will grow over time.
Term length
Term length is the amount of time you'll need to keep your funds in a CD after making the opening deposit. Terms commonly range from three months to five years, and the period you choose may impact your interest rate and potential earnings.
Minimum deposit
Most CD accounts require a minimum of $500 to $2,500 to open an account, although some have no minimum deposit requirements.
Early withdrawal penalties
If you cash in a CD early, before the end of the term, you might incur an early withdrawal penalty. Penalties and terms vary from bank to bank and should be disclosed when you open your CD.
