Certificates of Deposit "CD's"



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  • Certificates of Deposit "CD's"

    Certificates of deposit can be defined as fixed saving accounts that hold a fixed amount of money for a fixed amount of time. This amount of money attracts interests from the bank that offers the certificate of deposit. This means, when the fixed term ends, you get back your full amount plus the interest accrued.

    When the fixed term ends, this is referred to as maturity of your certificate of deposit. If it happens you need to withdraw the amount before the maturity date, then you will have to pay a penalty before withdrawing the amount.
    When opting for a CD, it is important to note the fixed amount of time before signing the papers or even virtual signature. Be sure to be comfortable with the time, whether three, six, nine, twelve, eighteen, twenty four, thirty six, forty eight and sixty months, which are the most common terms.

    How do you open a certificate of deposit account?

    Opening a CD account is quite similar to opening a normal current deposit account. The major difference is the instructions and agreement you agree to. The terms are quite different since this is a fixed deposit account you are opening.

    First, you will need to identify which certificate of deposit account you need. These CD accounts include:

    Bump-up CD – In this type, you benefit more when the bank raises the percentage yield. When you open this CD account and the bank raises the yield when you still have the account, the higher rates will apply to your funds too. The catch with the bank is that they can only allow up to one bump per term and you will have to ask the bank for the rise.

    The disadvantage is you get a lower initial percentage yield so that when the rates rise you will be catching up.

    • Traditional CD – This is the most opened CD account. You deposit an amount of money for a specific amount of time and the amount attracts interest which will be given during maturity. Early withdrawals cause penalty fees. After a term expires, you can choose to roll over to another term or withdraw the amount.

    Liquid CD – They are also known as no penalty CD’s. In this CD account, you are allowed to withdraw your money before the maturity date and with no penalty given. The catch here is you will attract less interest than a traditional CD account.

    Step-up CDs – Here you automatically get a higher yield without having to ask the bank. Unlike the bump up CD account, when the percentage yield of a bank rises, it will automatically reflect to your account too. However, when creating this account, you will have to weigh how much the yield could increase. You have no guarantee that the rates will rise more than a traditional CD account.

    Callable CD – Here, you are capable of attracting higher interests but if the bank percentage yields fall, they will usually recall the account and give back the funds, at the lower rate as the percentage yield of the bank fell.

    Zero-coupon CD – This is like a long-term investment where you buy a CD account at a discount. After buying the account at a discount, you will have to wait for the maturity which is usually long enough, in order for you to get the funds. This type of account is great for those who are willing to invest and wait for a long period of time before. At the end of the term, even though long, it is sure to be worth the wait.

    The drawback here is that you are credited each year but cannot access the funds but you will still have to pay taxes. So before taking this account, ensure you can pay for the taxes.

    High-yield CD – These are typically like traditional CD accounts that give better interests and returns.

    Brokered CD – As the name suggests, brokers are involved. In this case, you could purchase the account through a broker firm where you will need to open a brokerage account. Once you open this account, you won’t need to open a CD account with the bank again. These accounts pay higher rates than the ones opened at the bank. Guarantee for full interest is through having the account until the maturity date. This is because many opt to sell the accounts in a secondary market but you are never sure about the returns with that.

    It is also vital to ensure the brokerage firm you are using is backed by the Federal Deposit Insurance Corporation.

    Individual Retirement Accounts CD – This type gets an advantage when it comes to taxes because, many who take it need retirement savings with guaranteed returns. Protection of up to $250,000 can be earned if you purchase from a Federal Deposit Insurance Corporation institution.

    Jumbo CD – Jumbo means big. This means you will have to deposit a huge amount of money in the CD account. They often attract more interest than a traditional CD account. The average amount required is usually $100,000, depending with the bank or institution.

    Add-on CD – With this account, you get the chance to add more money on top of the previous deposit. Other accounts do not allow this to happen. However, there is a limit to the number of add-ons.

    Who provides certificates of deposit?

    Commercial banks and other financial institutions provide certificates of deposit. These banks and institutions are overseen by the Federal Deposit Insurance Corporation institution. However smaller institutions offer better interest rates than bigger institutions. The same applies to banks and credit unions that are not regulated and overseen by Federal Deposit Insurance Corporation institutions. They take the advantage of personal calculations to offer better interest rates but are not considered by many as safe.

    In addition to who offers certificates of deposit, there are banks that offer the best CD’s currently in the year 2021. These are banks like:

    • Bank of America

    • Quontic bank

    • Live Oak bank

    • Chase bank

    • Barclays bank

    • Ever bank

    • First National Bank of America

    Moreover, there are credit unions and institutions that offer the best certificates of deposit. They include:

    • Synchrony

    • Navy Federal Credit union

    • Capital one

    • Goldman Sachs

    • Comenity

    • Ally financials

    • Sallie Mae

    What rates are offered?

    First, the Federal Open Market Committee (FOMC), determine the rates for all banks. They will often meet and determine the drop or rise in the rates depending with the economic growth. These are rates that the banks pay to borrow money from the feds. Eventually, the same rates affect the interest rates of the CD accounts. Different banks offer different rates but do not differ much since they are all regulated by the same federal unit.

    Here is an example of bank and credit union rates as of July 2021:

    First National Bank of America Certificate of Deposit

    • Annual percentage yield - 0.60% to 1.15%

    • Minimum Deposit Requirement $1,000

    • Terms - 2 Months to 7 Years

    Limelight Bank CD

    • Annual Percentage Yield - 0.45% to 0.70%

    • Minimum Deposit Requirement - $1,000

    • Terms - 6 Months to 3 Years

    TAB Bank

    • Annual Percentage Yield - 0.40% to 0.75%

    • Minimum Deposit Requirement - $1,000

    • Terms - 6 Months to 5 Years

    Quontic Bank

    • Annual Percentage Yield - 0.55% to 1.11%

    • Minimum Deposit Requirement - $500

    • Terms – 6 months to 5 years

    Connexus Credit Union Share

    • Annual Percentage Yield - 0.61% to 1.06%

    • Minimum Deposit Requirement -$5,00

    • Term – 12 month to 5 years

    CW Certificate Account

    • Annual Percentage Yield - 0.85% to 0.95%

    • Minimum Deposit Requirement - $1,000

    • Term – 6 months to 5 years

    My eBanc Online Time Deposit

    • Annual Percentage Yield - 0.35% to 0.65%

    • Minimum Deposit Requirement - $5,00

    • Terms - 6 Months to 3 Years

    Comenity Direct

    • Annual Percentage Yield - 0.70% APY

    • Minimum deposit requirement - $1,500

    • Terms – 6 months to 3 years

    Factors to consider when choosing a Certificate of deposit

    There are many factors to consider before getting that signature on that agreement. These factors will determine the comfort you get, basing there are different types of CD accounts. Different banks and institutions could also have different regulations.


    Safety is key. It is wise to ensure the bank or institution you open a CD account with is insured by the Federal Deposit Insurance Corporation. This will cover you in case of a bank failure.

    Minimum deposit

    It is wise to open an account that requires an amount you can comfortably deposit. Accounts like Jumbo CD require a deposit of huge sums of money and can only be essential for those who have it.


    Penalties are offered in case of early withdrawals. Ensure to look at the terms and conditions regarding the penalty, the fee for the penalty and what happened if you don’t pay as required.


    The term offered by the bank is by far an important factor to note. Different banks offer different terms and different CD accounts. Be sure to confirm the term. Some banks offer longer terms for longer interests too.

    Customer service

    A proper customer service goes a long way. In case of any questions or concerns, the customer desk should be able to responsive at any time since these are your financial matters that could easily influence your future.

    Digital/mobile banking

    In this new era, mobile banking comes in handy. It is a good factor to consider that the bank or institution you are opening a CD account with ventures in digital banking. This will be convenient for you as you can always check your account online.

    Advantages and disadvantages of Certificates of Deposit

    With CD’s, there are definitely more good than bad. CD’s are generally life savings that could easily impact your future life financially.



    Having a CD is considered a safe investment. Whether the rates change or not, the interest will still remain. Safety also comes in as you will save more than spend it as the money cannot be withdraw until a further date of maturity.


    With CD’s, there are flexible terms depending with different institutions. Flexibility enables one to choose terms that are comfortable with them. This is fair.

    Better returns

    The returns of a CD are usually better compared to a savings account. When signing the agreement you most likely have calculated the end goal. Interests accrued with a CD is better off. The longer the term with a CD the better the result too.


    When you deposit your money in a CD account, you are guaranteed of a higher amount when maturity comes. This is beneficial.



    With a CD account, there is no liquidity. This is because you cannot withdraw the money and if you do, a penalty will have to be paid. The fact that this is a fixed agreement means you will have to wait for the maturity date.

    Inflation risk

    If inflation rates grow faster than the CD rates, this may be a problem. This will mean your account will lose the purchasing power it had when you crated it thus resulting to lower returns.

    Fixed rate

    The fact that CD accounts can only earn a fixed amount interest is quite unfortunate. Whether rates rise during the term or not, you are sure to get what you signed for initially.
    Generally, certificate of deposit is a great way of earning interest for your money. CD’s also create a sense of discipline and patience in you as you will have to wait.

    On the other hand, there are online CD’s available depending with each institution. Some banks encourage online applications while others encourage in person or phone applications. Online applications can save on time as it may take from ten to twenty minutes depending with the bank. Online CD’s are safe to use too but many individuals prefer offline. However, with online CD accounts, different rates could be offered which might turn out to be lower, meaning your interests will be lower too.

    Banks like HSBC, Quontic bank and Bank of America offer online CD accounts. Not all banks offer online CD accounts for safety purposes.