How To Open A Certificate Of Deposit Account

A certificate of deposit (CD) is an excellent way to make the most of your money without taking the same risks as you would when purchasing stocks and bonds. If you get a fixed term on your CD rate, you can give your savings a boost and help you better plan for retirement or other long-term goals.

Those who have a CD typically use the returns as supplementary income, particularly during their retirement years. Some people have multiple CDs, or a CD ladder, to build an emergency savings and collect more interest compared to a standard bank account. 

Opening a CD is a straightforward process that works almost the same as creating a bank account — just with a few more steps. 

How To Open A CD

Select An Insured Financial Institution

Banks and credit unions are respectively insured by the Federal Deposit Insurance Corporation (FDIC) and the National Credit Union Administration (NCUA). These regulatory bodies ensure that you won’t lose any money (up to a certain amount) if the institution fails. 

Pick A CD

There are various types of CDs available based on your needs and goals. Pick which kind you want, then visit your chosen financial institution to begin the process.

Choose Your Term

The next step is picking a term length for your CD. “The longer the term length, which means the longer you commit to keeping your money in the account, the higher the interest rate you’ll earn,” Key Wealth Partners, LLC certified financial planner David Niggel told

Determine Interest Payment Collection Frequency

You have two choices when it comes to collecting the interest on your CDs. You can either get a lump sum once a year or distributed as 12 monthly payments. Alternatively, you can invest your earnings again to produce higher compounding returns. 

When the term expires, the financial institution will return your deposit and last interest payment.

Make An Account

If you don’t have a bank account yet, you will have to make one with the financial institution selling your CD. When you open one, you will need to provide your:


  • Name
  • Physical and mailing address
  • Contact information
  • Social Security number


Fund The CD

You will need to select your preferred method of funding your CD account. You have several options, including online or phone transfers or checks. 

CD Types And Features

Aside from knowing how to open a CD account, you may also want to learn about the various options of CDs so you can find the best one for your goals. As you assess different CDs’ features, you will want to keep any details that may affect the account’s interest rate in mind.

Traditional CDs come with fixed terms and interest rates, though it’s not necessarily set in stone. In some cases, you could start a variable-rate CD, which comes with fluctuating interest rates. Other options include:


  • Liquid (no-penalty) CDs: These have a slightly lower interest rate than traditional CDs, but the benefit is that you can remove some of the money penalty-free
  • Callable CD: These have a higher interest rate than traditional CDs, but the financial institution can “call” the account, which means it ends the term prematurely and stops future payments. While you will receive any interest the bank or credit union still owes you, that is the extent of your return.
  • Bump-up (adjustable-rate) CDs: These allow you to adjust the interest rate if rates increase down the road. However, you can only request an adjustment a few times. When interest rates fall, so do those of bump-up CDs.


In addition to the range of CD options you can choose, you will also want to explore each ones’ features. Here are several to think about before opening a CD account:


  • Interest rate and APY: Like a standard savings account, the financial institution that issued your CD will give you interest on the funds in the account
  • Term limits: Terms vary from under a month to ten years or even longer
  • Minimum deposit: Similar to a bank account, some CDs may require that you pay a certain amount to open the account
  • Penalties for early withdrawal: Like a 401(k), you can receive a hefty penalty for removing your funds before the end of the term. 
  • Miscellaneous fees, such as monthly and yearly charges or other unexpected payments 


  • Woods, Joslin. “How to Open a Certificate of Deposit (CD): Discover.” Discover Bank – Banking Topics Blog, Discover Bank, 4 Dec. 2018,
Ian Schindler