Email FacebookTwitterMenu burgerClose thin

How to Open a CD Account


Certificates of deposit (CD) accounts allow depositors to earn a guaranteed interest rate in exchange for keeping their money in the account for a predetermined length of time. These accounts can have higher interest rates than those on traditional savings accounts. Here are the steps you need to take if you’re thinking about opening a CD account. For more personalized assistance, consider working with a financial advisor who can help you with all of your investment needs. 

Step 1: Determine Your Investment Goals

One of the first steps in opening a certificate of deposit account is determining your investment goals. For instance, are you saving for a short-term goal, like vacationing next year? Or are you saving for a long-term goal, like a down payment on a house or funding your child’s education?

Withdrawing funds from a CD before its maturity date can result in penalties and fees, so you should ideally have a separate emergency fund or other liquid assets available if needed.

Step 2: Research CD Accounts

Once you have determined your investment goals, research different CD accounts to find the one that is the best fit for you. To find the best choices, consider these factors:

  • Interest rates: Always check rates before choosing a CD. Generally, longer-term CDs have higher interest rates than shorter-term CDs. However, in some cases, rates are similar regardless of the term length.
  • Interest payments: Some CDs make monthly interest payments, while others pay at the end of the term.
  • CD terms: CDs are an example of a term deposit. Short-term CDs can have a term of a few months or less, while long-term CDs can last as long as 10 years.
  • Deposit requirements: Some CDs have minimum deposit requirements, so you must find one that aligns with your available funds. In addition, CDs can have penalties for withdrawing money early.

When comparing CDs, you should also read the fine print and understand the terms and conditions of the CD before opening the account. Look for information on early withdrawal penalties, renewal options and other details. You can find the best CD for your investment needs by doing your research and comparing different CD options.

Step 3: Pick the Best CD For You

how to open a cd account

After researching different CD options, you must decide on the best CD for your investment needs. To make the right decision, evaluate the risk and return associated with each CD. You can also build a CD ladder if you can’t settle on just one account. Although CDs are generally considered a low-risk investment, you must consider the potential return on your investment and the risks associated with each CD account.

Another key factor to consider is the reputation and customer service of the financial institution offering the CD. It’s typically best to choose a reputable institution with a history of excellent customer service. Ensure you read reviews and ratings from other customers to understand the institution’s reliability.

Step 4: Open Your Account

Once you’ve settled on the right CD, it’s time to open your account. Here are the steps to follow:

  • Gather the Required Information: To open a CD account, you must provide some personal information, such as your name, address and social security number. You may also need to provide identification, such as a driver’s license or passport. In addition, you’ll need to have the minimum deposit required by the financial institution to open the CD account.
  • Contact the Financial Institution: Depending on the financial institution’s policies, you can open a CD account in person or online. If you choose to open the account in person, you must visit a financial institution branch. If you decide to open an account online, visit the financial institution’s website and follow the instructions to open a CD account.
  • Complete the Application Process: Once you have provided all the required information and funds, you must complete the application process. This may involve signing some documents or agreeing to the terms and conditions of the CD.

Opening a CD account is a straightforward process, but ensuring you have all the required information and funds before you begin is important. By following the steps outlined above, you can open a CD account and earn interest on your investment.

Step 5: Fund Your CD

Once your application has been approved, fund your account with the minimum deposit required by the financial institution. This can be done through a transfer from another account, a check or cash.

Keep in mind that you can only fund a CD at the beginning of the term. This is different from savings accounts, for example, which you can fund on an ongoing basis. Thus, you will need the entire amount you want to deposit into the CD upfront.

The Bottom Line

how to open a cd account

Opening a CD account can be a low-risk way to earn interest on your savings. To choose the best CD account, you must account for the risks, reputation, length of term and customer service record of the institution you are considering. Once you have weighed these factors, opening a CD account is usually straightforward. With careful planning and research, a CD can be valuable to your investment portfolio.

Tips for Saving

  • A financial advisor can help you work through your banking needs and create a plan for your unique situation. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
  • Term deposit accounts such as CDs usually pay higher interest rates than checking and savings accounts. But that doesn’t mean all CDs pay great rates. Some also have high minimum investments. Check SmartAsset’s list of the best CD rates to be sure you are making the most of your money.

Photo credit: © Djeric, ©, ©