How to purchase a bank CD

You buy a CD by opening an account at a bank or credit union, depositing a lump sum of money, and agreeing to leave it untouched for a set period—usually three months to five years. The bank pays you a fixed interest rate for that time. When the term ends, you get your original deposit plus the interest earned. You can start the process online, by phone, or in person at a branch, and most banks let you fund the CD from an existing checking or savings account.

The main decision is choosing the term length and comparing rates across banks, because the rate you lock in today is the rate you keep for the entire period. A longer term usually means a higher rate, but your money is locked away longer. If you withdraw before the term ends, you typically pay an early withdrawal penalty that reduces your earnings or eats into your principal.

Key Takeaways

  • You need a minimum deposit amount, which varies by bank and CD type—often $500 to $2,500, though some banks offer CDs with no minimum.
  • Interest rates are fixed for the entire term, so compare rates across multiple banks before you commit, because rates differ significantly even for the same term length.
  • Early withdrawal penalties are real costs; read the penalty terms before you buy, because some banks charge three months of interest and others charge more.
  • Your CD is insured up to $250,000 per depositor per bank by the FDIC (or NCUA at credit unions), so money in a CD is protected even if the bank fails.
  • You can buy a CD online in minutes if you have an existing account at that bank, or open a new account and fund it in the same transaction.

Where to buy a CD and what information you need

You can buy a CD at any bank or credit union that offers them. Most large national banks (Chase, Bank of America, Wells Fargo, Citibank) offer CDs, as do regional banks, community banks, and online-only banks. Credit unions also offer CDs, often called share certificates. Online banks frequently offer higher rates than brick-and-mortar branches because they have lower overhead costs.

To buy a CD, you will need:

  • Your Social Security number or tax ID
  • A government-issued ID (driver's license, passport)
  • Your address and phone number
  • The amount of money you want to deposit
  • A way to fund it (a linked bank account, wire transfer, or cash deposit at a branch)

If you already have a checking or savings account at the bank, the process is faster—you can usually buy a CD in minutes using your existing account to fund it. If you are opening a new account to buy a CD, you will need to complete the account opening first, which takes 5 to 10 minutes online or in person.

Comparing CD rates and terms across banks

CD rates change daily and vary widely between banks. A one-year CD at one bank might pay 4.5% while another pays 5.2% for the same term. Over a year, that difference adds up: on a $10,000 CD, the higher rate earns $520 more than the lower rate. Websites like Bankrate, DepositAccounts, and the banks' own websites let you compare rates side by side.

When comparing, look at the annual percentage yield (APY), not just the interest rate—APY accounts for how often interest is compounded and shows you the true return. Also check the minimum deposit required, because some banks have no minimum while others require $2,500 or more. A bank offering a high rate but requiring $25,000 minimum may not be an option for you.

Term length affects rate: typically, longer terms pay higher rates. A three-month CD might pay 4.0%, a one-year CD 4.8%, and a five-year CD 5.3%. But this is not always true—sometimes short-term rates are competitive if the bank is trying to attract deposits. Shop around before you commit, because once you buy a CD, you are locked in at that rate.

The step-by-step process to open and fund a CD

If you are buying online at a bank where you already have an account, the process is straightforward:

  1. Log into your account on the bank's website or app.
  2. Navigate to the CD or savings products section.
  3. Select the term length you want (3 months, 6 months, 1 year, 2 years, 5 years, etc.).
  4. Enter the amount you want to deposit.
  5. Review the APY, maturity date, and early withdrawal penalty.
  6. Confirm the funding source (usually your checking or savings account at that bank).
  7. Review and accept the CD agreement.
  8. Submit. The CD opens immediately, and your money is transferred from your linked account.

If you are opening a new account to buy a CD, you will complete the account opening first (providing your ID, address, and Social Security number), then follow the same steps above. The entire process takes 10 to 15 minutes online.

If you prefer to buy in person, visit a branch with your ID and the amount you want to deposit. A banker will walk you through the options, help you choose a term, and open the CD on the spot. Funding can happen immediately from cash, a check, or a transfer from another account.

Understanding early withdrawal penalties and what happens at maturity

An early withdrawal penalty is a fee you pay if you take money out before the CD term ends. Penalties vary by bank and term length. A common penalty is three to six months of interest, but some banks charge a flat fee or a percentage of the deposit. A $10,000 CD earning 5% APY for one year would earn $500 in interest; if the penalty is three months of interest, withdrawing early costs you $125 and you receive $10,375 instead of $10,500.

Read the penalty terms before you buy, because they are not standardized. Some banks publish the penalty clearly on the CD product page; others bury it in the terms and conditions. If you think you might need the money before the term ends, look for a CD with a lower penalty or a shorter term. Some banks offer no-penalty CDs that let you withdraw without penalty, though they typically pay lower rates.

When your CD reaches maturity (the end of the term), the bank will notify you. You then have a choice window—usually 7 to 10 days—to decide what to do. You can let the CD renew automatically at the current rate (which may be higher or lower than your original rate), withdraw the money, or move it to a different product. If you do nothing, most banks automatically renew the CD at the new rate. Check your email or account for the maturity notice so you do not miss the window to make a choice.

FDIC insurance and how your money is protected

Money in a CD at an FDIC-insured bank is protected up to $250,000 per depositor per bank. This means if the bank fails, the FDIC will return your deposit and accrued interest up to $250,000. Credit union CDs are insured the same way by the NCUA (National Credit Union Administration) up to $250,000.

The $250,000 limit applies per bank, not per CD. If you have two CDs at the same bank totaling $300,000, only $250,000 is insured. If you want to insure more than $250,000, you can spread deposits across multiple banks or use different account ownership categories (for example, a CD in your name and a separate CD in your spouse's name at the same bank are each insured to $250,000).

You do not need to do anything to activate this insurance—it is automatic. The bank's website or account statements will show whether it is FDIC-insured. If you are unsure, search the bank's name on the FDIC's Bank Find tool to confirm.

Frequently Asked Questions

Can I buy a CD with money from another bank?

Yes. You can fund a CD with a wire transfer, ACH transfer, or check deposit from any bank account. If you are opening a new account to buy the CD, you can link your existing account and transfer money during the account opening process. Wire transfers and ACH transfers usually complete within one to three business days.

What happens if I need the money before the CD matures?

You can withdraw it, but you will pay an early withdrawal penalty. The penalty reduces your earnings or principal. Some banks offer no-penalty CDs that let you withdraw without cost, though rates are usually lower. Before you buy, decide whether you might need the money and choose a term or CD type accordingly.

Do I pay taxes on CD interest?

Yes. CD interest is taxable income. The bank will send you a 1099-INT form at the end of the year showing the interest you earned, and you report it on your tax return. If you earn more than $10 in interest, the bank must issue a 1099-INT.

Can I buy a CD for someone else?

You can open a CD in someone else's name if you have their permission and information, but you typically cannot buy a CD as a gift without their involvement. Some banks allow you to open a CD in a minor's name if you are the parent or guardian. Contact the bank directly to ask about options for your situation.

What is the difference between a CD and a high-yield savings account?

A CD locks your money for a set term and pays a fixed rate; a high-yield savings account lets you withdraw anytime without penalty and pays a variable rate that can change. CDs usually pay higher rates because your money is locked away. Choose a CD if you do not need the money for several months or years; choose a savings account if you want flexibility.