A certificate of deposit (CD) is a savings product where you deposit money for a fixed term — typically 3 months to 5 years — in exchange for a guaranteed fixed interest rate. At the end of the term, the bank returns your deposit plus all interest earned. You cannot withdraw the money early without paying a penalty.
As of September 2026, top CD rates reach approximately 4.44% APY at online banks — well above the FDIC’s national average for the same term.
See best CD rates 2026 for the highest rates by term, or the CD Guide 2026 for the full overview.
Key Features of a CD
| Feature | Detail |
|---|---|
| Interest rate | Fixed for the full term — guaranteed regardless of market moves |
| Term | 3 months to 5+ years |
| Early withdrawal | Penalty applies; formula varies significantly by bank and term |
| FDIC/NCUA insured | Up to $250,000 per depositor per institution |
| Compounding | Daily or monthly in most cases |
| Minimum deposit | $0–$2,500 at most banks; jumbo CD thresholds vary ($25,000–$100,000+) |
| Tax treatment | Interest taxed as ordinary income in year credited |
| Access at maturity | Typically 7–10 day grace period to withdraw, reinvest, or transfer |
How a Certificate of Deposit Works
- Open an account. Choose a bank, select a term and amount, and fund your CD. Most online banks allow this entirely online in minutes.
- Rate is locked. The APY you agree to at opening is fixed for the full term. If market rates fall, your rate stays the same. If rates rise, you are locked in at the lower rate.
- Interest accrues. The bank credits interest to your CD daily or monthly. Most CDs compound daily, meaning interest earns additional interest automatically.
- CD matures. On the maturity date, your term ends. You receive your original deposit plus all accumulated interest.
- Choose your next step. Withdraw, roll into a new CD, or transfer to another account. Most banks auto-renew if you take no action during the grace period.
For a detailed walkthrough, see how do CDs work?
CD Rates in September 2026
The Federal Reserve cut rates through 2024 and 2025, reaching its current target range of 3.50%–3.75% after cuts in September and December 2025, and has held that range through the FOMC meetings held so far in 2026. The result: CD rates remain elevated relative to historical (2010s) averages but have softened from the 2023–2024 peak.
| CD Term | Best Rate (Online Bank, Sept 2026) | FDIC National Average (Aug 2026) |
|---|---|---|
| 3-month | 3.90–4.25% APY | 1.14% APY |
| 6-month | 4.15–4.30% APY | 1.41% APY |
| 12-month | 4.30–4.44% APY | 1.71% APY |
| 18-month | 4.25–4.35% APY | n/a (no direct FDIC series) |
| 24-month | 4.30–4.40% APY | 1.57% APY |
| 36-month | 4.30–4.50% APY | 1.34% APY |
| 60-month | 4.30–4.50% APY | 1.36% APY |
Worked example: James deposits $15,000 in a 12-month CD at 4.35% APY at an online bank. After 12 months, he receives $15,652.50 — $652.50 in interest, compared to roughly $27 if the same amount sat in a traditional savings account at 0.18% APY.
For the CD rate forecast, see our rate outlook guide.
Types of Certificates of Deposit
Not all CDs are identical. Understanding the types helps you choose the right one:
| CD Type | How It Differs | Best For |
|---|---|---|
| Traditional/Standard CD | Fixed rate, fixed term, penalty for early exit | Most savers with a specific goal date |
| No-penalty CD | Withdraw anytime after 6–7 days without penalty | Savers who might need funds before term |
| Bump-up CD | Request one rate increase if rates rise during term | Rising-rate environments |
| Callable CD | Bank can call it early; offers higher initial rate | Investors comfortable with reinvestment risk |
| Add-on CD | Deposit additional funds during the term | Savers who want to build their balance over time |
| Jumbo CD | Large minimum deposit ($25,000–$100,000+); doesn’t reliably pay a premium in today’s market | High-balance savers who verify the rate first |
| IRA CD | CD held inside a traditional or Roth IRA | Retirement savers wanting guaranteed return |
| Brokered CD | Purchased through a brokerage; tradeable on secondary market | Investors wanting CD-like safety inside a brokerage |
| Share certificate | Credit union equivalent of a CD; NCUA-insured | Credit union members |
CD vs. High-Yield Savings Account
The most common comparison for savers choosing between the two:
| Feature | CD | High-Yield Savings Account |
|---|---|---|
| Rate type | Fixed (guaranteed) | Variable (can rise or fall) |
| Liquidity | Locked until maturity | Withdraw anytime |
| Penalty | Yes, if early withdrawal (varies by bank) | No |
| FDIC/NCUA insured | Yes | Yes |
| Best current rate (Sept 2026) | ~4.44% APY (1-yr) | ~4.00–4.40% APY (verify current rate) |
| Best for | Specific future goal, rate lock | Emergency fund, ongoing flexible savings |
Rule of thumb: Use a HYSA for your emergency fund and any money without a firm date. Use a CD for money you will not need until a specific future event — and use a CD ladder to get both liquidity and yield. Full comparison: CD vs high-yield savings account.
CD vs. Treasury Bills and Bonds
Both CDs and Treasuries offer guaranteed returns with government backing — but with key differences:
| Feature | CD | Treasury Bill/Note |
|---|---|---|
| Backed by | FDIC/NCUA + bank | U.S. federal government |
| Term | 3 months to 5+ years | 4 weeks to 10 years (bills through notes) |
| State/local tax | Taxable | Exempt |
| Liquidity | Penalty for early exit (varies by bank) | Sell on secondary market |
| Yield (1-yr, Sept 2026) | ~4.30–4.44% APY | ~4.37% (per Fed H.15, Sept 14, 2026) |
In states with high income tax (California, New York), Treasuries may generate higher after-tax returns than CDs at comparable rates. Full comparison: CDs vs Treasury bills 2026.
Early Withdrawal Penalties
Withdrawing before maturity is allowed but costly, and the exact penalty formula is set individually by each bank — there is no universal schedule. As illustrative examples: Capital One 360 (which absorbed Discover Bank’s CD business in 2025) charges 3 months of interest on terms of 12 months or less and 6 months of interest on longer terms. Other banks use different schedules, sometimes tiered by exact term length.
On a $10,000 CD at 4.35% APY with a 180-day penalty, breaking the CD early costs approximately $214.52 — the bank deducts that from your earned interest. If you haven’t earned enough interest yet, some banks will deduct from principal (read your agreement carefully).
If you think you might need early access, choose a no-penalty CD or keep the money in a HYSA instead.
FDIC Insurance on CDs
Every CD at an FDIC-member bank is insured at exactly the same level as a checking or savings account:
- Up to $250,000 per depositor, per bank, per ownership category
- Joint accounts are insured up to $500,000 for two owners at a single bank
- IRA CDs have a separate $250,000 coverage category
If you have more than $250,000 to invest in CDs, spread it across multiple banks to maintain full FDIC coverage. For more, see are CDs safe?
Who Should Use a CD?
Good fit:
- Saving for a specific goal with a known date — home down payment, wedding, tuition, new car
- Locking in today’s elevated rates in case the Fed resumes cutting
- Building a CD ladder to capture long-term rates while maintaining annual liquidity
- Retirees who want guaranteed, predictable income
Poor fit:
- Emergency fund (needs to be liquid — use a HYSA)
- Money you might need before the maturity date
- Long-term investors seeking growth (diversified equity investments have historically outperformed CDs over 10+ year periods, though with market risk)
- Savers still carrying high-interest debt (pay off high-interest debt first — its rate is almost always higher than any CD)
How to Open a CD
- Compare rates at online banks — best CD rates 2026 or the FDIC’s monthly rate survey
- Choose your term based on when you need the money
- Open online: name, Social Security number, address, and linked bank account
- Fund the CD via ACH transfer (1–3 business days)
- Confirm the APY and maturity date in writing
- Set a calendar reminder 2 weeks before maturity
For a complete walkthrough including brokerage CDs and tax strategy, see how to invest in CDs.
Are CDs Worth It in 2026?
Often, yes — for the right use case. At roughly 4.30%–4.44% APY, a 12-month CD pays more than at almost any point since 2007. A $20,000 CD at 4.35% earns about $870 in a year — compared to roughly $36 in a traditional savings account at 0.18% APY. If you have money you won’t need for at least 3–12 months, a CD is generally superior to a standard savings account.
Full verdict: are CDs worth it in 2026?
Related Guides
- CD Guide 2026 — full hub with rates, tools, and strategies
- How Do CDs Work? — step-by-step mechanics
- How to Invest in CDs — where to buy and how to pick the right term
- Best CD Rates 2026 — highest APYs by term
- CD Laddering Strategy 2026 — maximize yield with staggered maturities
- No-Penalty CD Rates 2026 — the flexible alternative
- CD vs High-Yield Savings Account 2026 — which is right for you?
- CDs vs Treasury Bills 2026 — after-tax comparison
The content on Wealthvieu is for informational purposes only and should not be considered financial, tax, or investment advice. Consult a qualified professional before making financial decisions. Full disclaimer · Editorial policy