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How much money should you keep in a CD?
If you’re considering a certificate of deposit (CD), you may have an idea of how much you should put down. But it depends on a variety of factors, including where you open the account, your financial goals, and how much you have in reserve.
The amount you should put into a certificate of deposit (CD) depends on several important factors:
- To open an account, you’ll need to save up at least enough money to meet the minimum CD requirements.
- You need to be sure you won’t need this money during the term of the CD, or you could incur early withdrawal penalties.
- If you’re saving for a short-term goal, like a down payment on a house, put away enough money to reach that goal, or enough to get you there with the interest earned in the CD.
- If you’re saving for a long-term goal, such as retirement, you may want to save less money in CDs and instead consider other investments that may earn you higher returns in the long term.
Your financial goals, current savings, high-interest debt, and time horizon will help you decide how much money to put into a CD.
What is the minimum deposit for a CD?
Most CDs require at least $500 to $1,000 to open, but some have no minimum deposit requirements.
Here are the minimum deposit requirements for some of the major banks:
Note: The minimum deposit amounts listed above are accurate as of August 20, 2024.
It’s important to note that some financial institutions offer tiered interest rates, meaning consumers can earn higher interest rates by meeting higher minimum deposit amounts.
Also, keep in mind that different types of CDs, such as no-penalty CDs and bump-up CDs, may have different minimum amounts.
Jumbo CDs vs. Traditional CDs
If you’re looking to deposit more than $95,000, a large CD may be to your advantage. Large CDs typically require a deposit of at least $95,000. Leaving that money in for a year or two can be beneficial for those who might otherwise be tempted to spend the money. As with other types of CDs, you need to make sure the money stays in the CD for the duration.
Jumbo CDs are less common, but can be found at some banks and credit unions. They are called jumbo CDs, or interest rate tiers with higher yields above $95,000.
Just because a CD is called a jumbo CD doesn’t mean the yield is “jumbo.” Some banks pay the same yield on jumbo CDs as traditional CDs with the same terms. Banks that pay competitive yields on all balances may offer a higher annual percentage yield (APY) than CDs marketed as jumbo CDs.
If you’re looking for a jumbo CD, compare CD interest rates to see if you can get a better interest rate by depositing a larger amount.
How many CDs can I have?
There is no limit to the number of CDs you can have at one time, but some institutions may have restrictions on the number of CDs you can have at one time.
Your savings strategy may determine how many CDs you want to open. You may need more than one CD if:
- You want to maximize your APY but want to stagger your maturity dates
- I want to start CD ladder
- You need to split that lump sum into various savings vehicles, including CDs.
While there’s no limit to the number of CDs you can have, we recommend spreading your money across several types of investments so you don’t have all your cash all in one place. Also, consider Federal Deposit Insurance Corporation (FDIC) insurance, which protects your money up to limits of $250,000 per depositor, per FDIC-insured bank, and per ownership category.
Be careful not to lock up too much money
CDs offer a guaranteed yield and the opportunity to grow your savings, so long as you hold the account until maturity. Because it’s difficult to predict the future interest rate environment, you should avoid putting too much money into a long-term CD in case interest rates rise. One way to keep up with potential interest rate increases is to build a CD ladder.
If you lock in your money at a fixed rate of return, you might also be concerned that it may not keep up with inflation. If inflation exceeds yields, it may be worth investing your money elsewhere or focusing on paying down debt instead. However, there’s a chance that your current fixed CD yield will exceed inflation in the future.
Another problem is that insurance provided by the FDIC and the National Credit Union Association is limited to $250,000 per depositor, per insured bank (or per insured credit union in the case of NCUA credit unions), and per ownership category. Anyone putting more than $250,000 in a jumbo CD runs the risk of losing their money if the bank fails.
The interest you earn on your CD investments is also taxable, another reason you’ll want to earn the highest yield possible to make up for the taxes you owe on your gains.
“Unless you hold your jumbo CDs in a tax-deferred retirement account, taxes on the interest will further reduce your returns and purchasing power,” says Alano Massi, a certified financial planner and managing director at Palm Capital Management in Westlake, California.
Plus, once you put your money in a CD, you don’t have the money until it’s due to be repaid, unless you’re willing to pay the early withdrawal penalty.
—Former Bankrate writer Renée Bennett contributed to an earlier version of this story.
