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Certificate of Deposit FAQs

Looking for a safe investment that avoids swings in the market? One that typically offers a higher rate of return than regular savings or checking accounts? Certificates of Deposit, commonly known as CDs, have you covered.

With a CD, you put money aside for a set amount of time so it can grow at a predetermined rate. But is it the right savings tool for your current situation? Let’s get some answers.

What are the pros and cons of a certificate of deposit?


  • Set interest rate for entire term — no market fluctuations
  • Estimating the dividends you will accrue is easy to do
  • CDs are protected when opened at a federally insured financial institution
  • Funds can be accessed in an emergency


  • A commitment to leave your money undisturbed for the length of the term
  • Rate fluctuation during your term can make other deposit types more appealing
  • Most CDs have early withdrawal penalties

What is a certificate of deposit?

A CD is a deposit account that allows you to save for a specific amount of time at a specific rate. If you avoid withdrawing your money during the specified timeframe, you earn dividends at the rate you signed up for.

How does a CD work?

All CDs are focused on earning you interest in a simple, straightforward way. With any CD type, you give your financial institution the full amount of money you want to deposit. Those funds are held for the length of time, or term, you’ve agreed to. Your principal and accrued dividends are returned to you at maturity, or the end of the CD’s term. At Numerica, terms can range from 3 to 72 months.

CDs often offer higher rates than a regular savings account. This larger payout is based on your commitment to not touch the money.

What does an initial deposit look like for CDs?

The initial amount of money you put into your CD can vary. At Numerica, there is a minimum balance requirement of $1,000 for a CD ($500 for IRA CDs). Most institutions only allow a one-time initial deposit. This means you can’t decide a few months down the road that you want to add more to your principal investment.

When it comes to deciding how much to put into your CD, consider your savings goals. For example, if you hope to buy a house in 2 years, you don’t want a CD with a term longer than 24 months.

What is the penalty for early withdrawals from a CD?

Early withdrawal penalties vary by financial institution and product. For example, you may have to forfeit some of the dividends earned. Asking about early-withdrawal penalties is an important step in determining if a CD is right for you.

What are the risks of a CD account?

While CDs are considered a low-risk investment, there are two primary considerations to locking your funds into a time-bound CD.

1. The chance rates will change

When things are rough economically speaking — think recession — a CD keeps its value because your rate is fixed for a set term. That’s a good thing when rates are sinking. Not so much if rates go up during your locked-in term. When that happens, your CD may end up earning less than a high-yield savings account, for example.

2. Needing the money before maturity

Life moves, sometimes in the blink of an eye. If you need access to your principal deposit funds to help cover an emergency before the end of your term, you can make a withdrawal. But typically, a penalty will be applied.

How does a bump-rate CD work?

A bump-rate CD can take some of the sting out of the risk of rising rates. This option offers the ability to “bump up” your rate during the locked-in term of your CD. Ask before opening your CD. Some certificates allow a one-time rate adjustment over the lifetime of your CD. In many cases, certain conditions may apply — such as a minimum term length of your CD — in order to be eligible to bump your rate.

How much will I earn on a CD?

Certificate of deposit earnings depend on what’s happening in the marketplace. This is because rates are typically set based on economic conditions. Use Numerica’s Certificate of Deposit calculator to estimate current earnings.

For a fuller discussion of your investment options, connect with a member of the Numerica Financial Services team.

Is putting money in a CD worth it?

Like any savings tool, it all depends on your goals and financial situation. It can be an excellent way to grow money while saving for a specific goal or setting aside funds you won’t need for a while.

What economic environment is best for investing in CDs?

Deposit products like CDs may benefit from a rising rate environment. When the Federal Reserve Bank raises rates to fight inflation, CDs rates typically go up. This means higher earnings for people using CDs to save and grow money. Keep in mind market conditions can change quickly.

Is it better to put my money in a CD or savings account?

This decision depends on your personal goals. If you prefer to have a small emergency fund with no restrictions, a savings account may be a more comfortable option for you.

On the flip side, if you find yourself casually dipping into your savings, a CD’s restrictions may keep you on track to your goals. In this instance, a CD of 6 months or more could limit your impulse purchases.

Are CDs safe?

Numerica CDs are federally insured by NCUA. Factor in a CD’s insulation from market fluctuations, and it is considered one of the safer investment types.

How do I open a CD at Numerica?

If you’re ready to open a CD, simply stop by a branch or call 800.433.1837. If you’d prefer, schedule a video or in-person appointment with us. We look forward to helping you reach your money goals.

Today's Rates

April 16, 2024