5 Steps to Open a Certificate of Deposit (CD) (2024)

FAQs

5 Steps to Open a Certificate of Deposit (CD)? ›

With a bank CD, you deposit funds directly into a bank for a set period, and in return, that bank offers to pay interest on your deposit at a set rate. Different banks offer different rates, so it may be helpful to shop around to find the most competitive rate before you buy a CD.

With a bank CD, you deposit funds directly into a bank for a set period, and in return, that bank offers to pay interest on your deposit at a set rate. Different banks offer different rates, so it may be helpful to shop around to find the most competitive rate before you buy a CD.

Minimum deposits vary from bank to bank; some institutions don't require an opening deposit while others may require a standard $1,000 (sometimes even more, as is the case for most jumbo CDs.) Likewise, early withdrawal penalties differ from bank to bank.

Traditional certificates of deposit (CDs) offer a fixed interest rate for a fixed term without the ability to withdraw or add to the principal. Specialty CDs include bump-up, add-on, no-penalty, jumbo, and individual retirement account (IRA) CDs.

Gather your documents: When you're ready to apply for a CD, you can get your documents in order to help you save time with the process. The exact requirements will vary by bank, but you'll often need: A government-issued ID, such as a driver's license or passport. Social Security or tax identification number.

Know a CD's minimum

CDs have a typical minimum balance or opening requirement that's often around $1,000, but it can range from $0 to $10,000. There are jumbo CDs with minimums traditionally around $100,000, though these CDs don't necessarily have the best rates in the industry.

Insert a blank disc into your CD or DVD burner. If your PC has more than one CD or DVD drive, select the drive you want to use. Search for the items in your Player Library that you want to burn to the disc, and then drag them to the list pane (on the right side of the Player Library) to create a burn list.

CDs require an initial deposit that is held until the maturity date, which can vary from six months to five years. CDs generally pay higher interest rates than savings accounts because the owner cannot easily withdraw the money.

How do you open a CD case? ›

Pinch the side of the CD case near one of the corners with one hand. Hold the middle of the case firmly with your other hand. Gently push the side of the case down with your thumb until the disk tray pops out of place.

Interest earned on CDs is considered taxable income by the IRS, regardless of whether the money is received in cash or reinvested. Interest earned on CDs with terms longer than one year must be reported and taxed every year, even if the CD cannot be cashed in until maturity.

A certificate of deposit (CD) is a savings account that holds a fixed amount of money for a fixed period of time, such as six months, one year, or five years, and in exchange, the issuing bank pays interest. When you cash in or redeem your CD, you receive the money you originally invested plus any interest.

While CDs can provide some guaranteed returns over time and some level of security, they're not likely to provide you the returns needed to build wealth for retirement over time. Instead, it might make more sense to build wealth with other assets and only use CDs for a portion of your portfolio.

Virtually all CDs are offered by federally insured banks or credit unions, with bank deposits protected by FDIC insurance and credit union deposits guaranteed by the National Credit Union Association (NCUA).

Using an online bank for CDs and other deposit accounts can be just as safe as using a brick-and-mortar bank, as long as the online bank is federally insured and takes basic steps to protect your information, such as: Encryption: Encryption technology can protect your username, password and other information.