A Certificate of Deposit (CD) is a type of savings account that holds money for a set period, called a term. CD terms generally range from a few months to a few years. You get a guaranteed interest rate during the CD term in exchange for agreeing to leave your money in the account for the term. CD rates are often higher than standard savings account rates.
Depending on the type of CD, there may be a penalty for withdrawing your money early, usually a set number of months’ interest.
CDs can be a great way to grow your savings. Let’s look at some of the benefits.
Earn a fixed interest rate
Standard CDs – sometimes called fixed rate CDs – offer a set rate for the entire term. Once you lock in your rate, it won’t change for the term of the CD, even if interest rates fluctuate. This guaranteed rate of return on the deposit can make CDs an option for anyone who doesn’t need their money in the short- or medium-term.
Potential to earn higher returns
CDs often offer higher interest rates than traditional savings accounts. Typically, the longer the term, the higher the rate.
Specialized options
Different types of CDs can suit different financial goals and needs.
For example, step up CDs come with rates that automatically increase after a set period. While most CDs charge a penalty for withdrawing money before the term ends, no penalty CDs allow you to access funds early without incurring any fees. This flexibility can be useful if you want to keep your money relatively liquid but still want to earn a higher interest rate than with a standard savings account.
May be FDIC-insured
CDs that are offered by an insured bank are FDIC-insured up to $250,000 per depositor, per insured bank.
This article is for general educational purposes. It is not intended to provide financial advice. It also is not intended to completely describe any Citi product or service. You should refer to the terms and conditions financial institutions provide for various products.