What is a CD?

A CD or certificate or deposit, is a federally insured deposit product with a fixed interest rate.

A CD is a certificate of deposit, a federally insured deposit account that has a fixed interest rate over a fixed amount of time (called “term” in the CD world). You agree to not touch the CD funds for a set period of time, and in return you may receive a higher interest rate than you would receive in a standard savings account. If interest rates change, the CD rate will not change until renewal. CDs are backed (insured) by the government, so they are virtually risk free.

Benefits & Features of a CD

  • CDs are safe and secure. Unlike investing in the stock market with its roller coaster ups and downs, investing in a CD is a safe bet.
  • CDs earn a higher rate of return than a standard savings account in most cases.
  • CDs have fixed rates for fixed terms. That just means you get to decide how much to invest in a CD and how long you'd like to wait to cash it out.
  • CDs have little to no fees1, which mean more money for you.

CD Terms

  • Add-to option – Add to options lets you make additional deposits2 to your CD after you've opened the account. It's great for earning more interest on your savings, but that additional money added is locked into the CD for the length of your term.
  • Bump-up CD - A bump-up CD is a certificate of deposit that gives the holder the option to increase the CD's interest rate if the rates increase. Usually, this is permitted only once.
  • Early withdrawal penalty – An amount of money charged to you for withdrawing funds from your CD before the maturity date.
  • Maturity date - The date your CD matures and you can withdrawal funds without penalty.
  • Term – The amount of time your CD is active. This is usually measured in months.

CDs vs Savings Accounts

Savings Account

Pros

  • Funds more accessible
  • No minimum balance requirement
  • Access via ATMs and can be transferred to checking as needed.

Cons

  • Typically, lower interest rates than CDs
  • Interest rate is variable

    • Certificate of Deposit (CD)

    Pros

    • Typically, higher interest rates than Savings
    • Interest rate is fixed
    • No fees if you don't withdrawal early

    Cons

  • Monetary penalties for early withdrawal
  • No access to ATM, or electronic transfers

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    1Early withdrawal penalties may apply. Fees may reduce earnings. To open this account, you must establish and maintain membership by opening a Member Advantage savings account or Member Share savings account. Information contained on this website does not constitute legal or tax advice. Individuals should consult with their financial adviser and/or attorney for advice.

    2Additional deposits must be auto transferred and the amount cannot be increased but can be canceled. The maximum amount per month is $1,000