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A Beginner’s Guide to Bank Account CDs: How to Get Started

A bank account Certificate of Deposit (CD) is a savings tool that allows you to earn a higher rate of return than a standard savings account. CDs are low-risk investments that can be a great option for beginner investors or those looking to diversify their portfolio. If you’re new to the world of investing and looking for high interest savings options, you can explore the benefits of bank account CDs with an online search right now.

What are Bank Account CDs?

A bank account CD is a type of deposit account that pays a fixed rate of interest over a set term. The term can range from several months to several years, and the longer the term, the higher the interest rate will typically be.

When you invest in a CD, you agree to keep the money in the account for the entire term. If you withdraw the funds before the end of the term, you may incur a penalty.

How Do Bank Account CDs Work?

When you invest in a CD, you deposit a lump sum of money into the account for a specified term. The bank then uses your deposit to make loans to other customers. The interest you earn is based on the interest rate agreed upon at the time of deposit and the length of the term.

At the end of the term, you can choose to either withdraw your money or roll it over into a new CD with a new term and interest rate. If you choose to withdraw the funds, you’ll receive the original deposit plus any interest earned.

Why Consider a Bank Account CD?

There are several reasons why you may want to consider a bank account CD as a beginner investor.

Guaranteed Returns: One of the biggest advantages of investing in a CD is the guaranteed rate of return. Unlike other investments that can fluctuate in value, your CD will earn a fixed interest rate over the term of the deposit, making it a low-risk investment option.

Diversification: Adding a CD to your portfolio can help diversify your investments, reducing the overall risk of your portfolio.

Safety: Bank account CDs are insured by the Federal Deposit Insurance Corporation (FDIC), meaning that your deposit is protected up to $250,000 per depositor, per insured bank.

Banks With the Best CD Rates

There are several banks that offer competitive CD rates for customers. People recognize Ally Bank, Marcus by Goldman Sachs, and Discover Bank as some of the banks with attractive CD rates.

Ally Bank: This online-only bank offers a range of financial products, including CDs. They are known for their competitive CD rates and a variety of CD terms, including no-penalty CDs for those who need access to their funds before maturity. Ally Bank also offers convenient online and mobile banking options.

Marcus by Goldman Sachs: The consumer-facing brand of the investment bank Goldman Sachs offers CDs with a range of terms, from 6 months to 6 years. They are known for their competitive interest rates and have no minimum deposit requirement to open a CD account.

Discover Bank: This full-service online bank offers a range of financial products, including CDs. They offer a variety of CD terms and are known for their competitive interest rates. Discover Bank is FDIC insured and offers 24/7 customer service.

These banks often have higher interest rates than the national average. Additionally, they offer the convenience of online and mobile banking, making it easy to manage your CD account. Before investing in a CD, it’s important to compare rates and terms from multiple banks to find the best option for your specific financial needs and goals.

How to Get Started with Bank Account CDs

Getting started with bank account CDs is easy. Here’s what you need to do:

Research: Start by researching different banks and credit unions to find the best CD rates and terms. Make sure to compare the interest rates, fees, and penalties before making a decision.

Open an Account: Once you’ve chosen a bank or credit union, you can open a CD account online or in-person. You’ll need to provide personal information, such as your name, address, and social security number.

Fund the Account: After opening the account, you’ll need to deposit funds into the CD. This can typically be done by transferring funds from a linked checking or savings account.

Choose the Term: Next, you’ll need to choose the term of the CD. The term can range from several months to several years, and the interest rate will typically be higher for longer terms.

Monitor the Account: After investing in a CD, it’s important to regularly monitor the account to ensure that the interest rate is still competitive. You can also choose to renew the CD or roll it over into a new CD with a different term and interest rate at the end of the original term.

Get Started Today!

Investing in a bank account CD can be a great option for beginner investors or those looking to diversify their portfolio. CDs offer a guaranteed rate of return, low-risk, and FDIC insurance protection, making them a safe and secure investment option.

Getting started with bank account CDs is straightforward. Simply research the best CD rates and terms online, open an account, fund it, choose the term, and monitor the account regularly. With a little planning, a CD can be a valuable addition to your investment portfolio.