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What Is a CD Bank Account?

A certificate of deposit account is simply another deposit product available at banks, alongside savings, money market, and checking accounts. But instead of depositing money that you can withdraw at will, or that you can add to overtime, CDs are generally a more fixed product that involves a one-time initial deposit and an agreement to keep those funds in the account without withdrawals for an established period of time, or maturity term.

The trade-off to locking in your funds is that you are in turn able to lock in the interest rate you’ll earn. Whereas a savings account rate can change at any time — or frequency — that the bank sees fit, opening a CD involves the bank making a written promise on the interest rate they’ll pay you for the duration of the term.

CDs are typically offered in standard maturity terms from 1 month to 10 years, with the most common terms ranging from 6 months to 5 years. But note that a bank can offer a CD in any term it wants. In fact, sometimes the top national rate is for an odd-term certificate — say, 5 months, or 19 months — which is being offered as a limited-time promotion.

How Much Do CDs Pay?

CDs generally offer a rate premium over more-liquid savings and money market accounts. That is, in exchange for your commitment to keep the funds in place, the bank will pay you more than it pays savings account holders.

Banks also typically pay a higher rate for longer commitments, as it means they can count on that money being in place for a longer period of time. So, on average, 5-year CDs pay a higher rate than 1-year CDs.

A higher initial deposit can also sometimes earn a more lucrative return, such as with jumbo CDs requiring $50,000, $100,000 or even $250,000. But many banks don’t offer jumbo tiers, and even when they do, the incremental rate improvement is often fairly small.

The FDIC calculates a weekly national average for various CD terms across all 4,000-plus FDIC banks. This average is extremely low, but fortunately it’s easy to earn many times more than that by simply doing your homework on the best current rates.

Why Do Shorter CDs Sometimes Pay More Than Longer Ones?

The longer you’ve agreed to hold your CD funds on account without touching them, the more cost-effective it is for the bank. That’s why, in theory, banks are willing to pay you more for longer commitments than short ones.

However, many other factors come into play regarding a particular bank’s deposit strategy. They must take into account what they expect will happen to national rates in the coming months and years, as well as how much in deposit assets they need to fund the lending side of their business, and how much in certificate balances they already have on hand for different maturity timeframes.

As a result, it’s not uncommon for a bank to offer a higher rate on one or more shorter terms in its menu. All this means is that it is using the more competitive rates to attract consumers to certain terms it believes are most beneficial to its current deposits portfolio.

Are Online Bank CDs Safe?

Traditional banks have been offering CDs for decades. But the banking environment has changed with the advent of the internet. Online banks now pepper the banking landscape, as do internet-only divisions of brick-and-mortar institutions.

The good news for CD shoppers is that the type of bank offering the CD is of little importance, so long as you verify that it’s FDIC-insured. That’s because internet banks are approved, regulated, and insured in just the same way that physical banks are. So whether you deposit $25,000 in a CD at a local branch of a bank in your community, or in a bank that operates only online with no branches at all, your money is equally protected.

This is especially fortunate when you learn that online banks are often among the top-paying CD banks. Given their lack of physical branches to operate, staff, and maintain, internet banks operate with lower overhead and are therefore generally able to pay higher rates to their customers.

What If I Need My Money Early?

While it’s true that locking your funds into a CD is the reason you can earn a higher return than with other savings accounts, it’s not impossible to withdraw your money early should you need to. Of course, doing so carries financial consequences, but the option is available if the need arises.

Every bank is required to have an established early withdrawal penalty policy, and as a potential CD depositor, you are entitled to be told what the policy is before you commit to a CD. It will also be spelled out in the official disclosures you're provided when opening a CD account.

The most common calculation method banks use to determine how much penalty you’ll incur is the deduction of a certain number of months’ interest from your balance at the time of early withdrawal, with the number of months of penalty interest often increasing for longer CDs.

For example, Bank XYZ might deduct 3 months of interest if you cash out a 1-year CD early. But if your certificate has a 5-year term, the early withdrawal penalty may be 12 or more months of interest.

Each bank can set their own policy, and the penalties vary widely. Though some are mild, others are quite onerous, with some policies even potentially reducing your principal. For this reason, it’s critically important to investigate the early withdrawal penalty policy for any bank CD you’re considering. Even if you don’t anticipate needing to cash out early, any policy that can eat into principal is best avoided, and when comparing two otherwise similar certificates, choose the one with the milder penalty -- just in case.

How To Open a Bank CD

Opening a certificate of deposit generally follows the same steps as opening any new bank account, and will involve more or less steps if you are a new customer of the bank or an established one.

You’ll first need to fill out an application. This is usually accomplished online, but can be done in-branch if you’re opening the certificate at a bank that operates in your community. Some banks also allow paper applications to be sent via U.S. mail.

If you’re not already a customer of the bank, you’ll need to prove your identity with photo identification. And you’ll be presented with various written account terms and disclosures that you’ll need to sign off on.

Just like with a savings or checking account, you’ll be presented with various options for making your initial deposit, whether that’s at the time of account opening or slightly later. Most banks offer transfers from another account at that bank, an external transfer from another bank, or a check that’s mailed in or submitted via mobile deposit.

Just remember that, unlike a savings or checking account, your initial CD deposit is a one-time deal. You cannot make a small deposit to open the account and then a large deposit to complete the certificate balance later. Every dollar you want committed to the CD must typically be deposited in a singular initial deposit.

As soon as you’ve completed the account opening process, it’s smart to put a reminder on your calendar a month or two before the CD will mature, so that you can think ahead about what you want to do with the money when it becomes available, and can watch your mail for a notice from your bank about how to convey your CD maturity instructions.

If you aren't looking to lock your money up for a period of time and want easier access to it, you could look at opening a high-yield savings account as an alternative. Below are some savings account options from our partners which can be competitive with the rates you can earn on CDs. It should be noted that unlike a CD, where your rate is locked in, with a savings account the bank or credit union can change your rate at any time.

What Is a 10-Year CD?

Most banks and credit unions don’t offer CDs for terms longer than five years. But a few banks do, allowing you to choose from CDs in one-year intervals all the way through a 10-year term.

Choosing a 10-year CD isn’t a light undertaking. You’re agreeing to set your money aside for an entire decade without withdrawing it or adding any more to it. It’s like a time capsule full of money that you send to your future self. 

Who Is a 10-Year CD Best For?

First of all, if you’re going to open a 10-year CD, you should be extremely confident that you won’t need the money for 10 years. The early withdrawal penalty on a 10-year CD can be substantial and it may even eat into your principal (the money you deposited into the CD), especially if you need to withdraw the money early on in its term. 

Ten-year CDs can be especially useful when there’s a high-interest rate environment on the cusp of shuffling back down into a low-interest-rate environment. In this scenario, you secure a high-income-producing account for many years to come. 

However, it’s a risky gamble. The flip side is that if interest rates begin to increase, you’ll be stuck with a stinker of an account that yields lower rates than you could get elsewhere. And you’ll pay a stiff penalty for withdrawing your money, to boot. Benchmark interest rates dropped in March 2020 and, historically speaking, the U.S. is in a low-interest-rate environment right now.

What Are the Alternatives to a 10-Year CD?

With most CDs, you can earn a higher rate by choosing a longer-term CD. But because a 10-year CD is just about the maximum term length any bank will offer, you don’t really have that option here. Instead, the only thing you can compare it with is a shorter-term CD from another bank.

It’s tempting to think of a 10-year CD as a good option for a long-term investment, such as your retirement savings. Instead, most financial experts advise investing in the stock market. It’s more volatile, but in the long run, it has historically yielded higher returns. 

Luckily, it’s possible to find CDs with a higher interest rate for a shorter period of time, which is usually a win-win. After all, even the best-laid plans sometimes go awry in a 10-year time span.

If you prefer instant account access, we have partnered with the following banks to bring you the high-yield savings and money market account offers displayed in the table.

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Banking / Interest Rates

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If you’re looking to set aside funds for a rainy day, Bank of America offers several savings account options. However, due to Bank of America’s size, its savings accounts tend to offer high fees and relatively low interest rates compared to the national average. It’s important to note that Bank of America offers different interest rates depending on customer location, so its rates may vary. To get a better interest rate on your savings accounts, you should compare the different offerings from Bank of America — and try to avoid any fees that might negate your savings.

Bank of America Savings Account Rates

Bank of America offers three types of savings accounts: Advantage Savings, Minor Savings and Custodial (UTMA) Savings. Here’s a look at the annual percentage yields and minimum opening deposit amounts for each of Bank of America’s savings accounts:

How Rates at Bank of America and Other Banks Compare

While Bank of America’s savings rates tend to be fairly low, so do the rates at other national banks. However, online banks commonly offer much higher rates than their brick-and-mortar counterparts.

To get an idea, take a look at this table that compares the interest rates for savings accounts and one-year CD accounts at both national and online banks:

The rates on savings accounts for Bank of America, Chase and Wells Fargo are identical at 0.01% APY, and they’re nowhere near the rates online banks like Ally and Vio offer at 0.50% APY or better. And while Bank of America dominates in the 12-month CD category among national banks, with a 0.03% APY, the rate is still considered low relative to the top interest rates offered by online banks.

How To Make the Most of Your Savings at Bank of America

Because its savings rate is 0.01% APY, it’s important to avoid Bank of America’s monthly fees, which can potentially cancel out any interest you may earn. The Minor Savings account does not have a monthly maintenance fee, but both the Advantage Savings and Custodial (UTMA) Savings accounts carry an $8 monthly maintenance fee. As long as you carry a $500 balance each month in either account, however, Bank of America will waive the fee.

Customers can also qualify for Preferred Rewards, which provides interest-rate boosters:

The booster increases Bank of America’s standard rate by at least 5%, 10% or 20% as you enter each respective Preferred Rewards tier, which can help you make the most of your savings balance.

Alexandria Bova contributed to the reporting for this article.

This content is not provided by Bank of America. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author alone and have not been reviewed, approved or otherwise endorsed by Bank of America.

Rates are subject to change; unless otherwise noted, rates are updated periodically. All other information on accounts is accurate as of  November 18, 2021.

What Is a CD Bank Account?

A certificate of deposit account is simply another deposit product available at banks, alongside savings, money market, and checking accounts. But instead of depositing money that you can withdraw at will, or that you can add to overtime, CDs are generally a more fixed product that involves a one-time initial deposit and an agreement to keep those funds in the account without withdrawals for an established period of time, or maturity term.

The trade-off to locking in your funds is that you are in turn able to lock in the interest rate you’ll earn. Whereas a savings account rate can change at any time — or frequency — that the bank sees fit, opening a CD involves the bank making a written promise on the interest rate they’ll pay you for the duration of the term.

CDs are typically offered in standard maturity terms from 1 month to 10 years, with the most common terms ranging from 6 months to 5 years. But note that a bank can offer a CD in any term it wants. In fact, sometimes the top national rate is for an odd-term certificate — say, 5 months, or 19 months — which is being offered as a limited-time promotion.

How Much Do CDs Pay?

CDs generally offer a rate premium over more-liquid savings and money market accounts. That is, in exchange for your commitment to keep the funds in place, the bank will pay you more than it pays savings account holders.

Banks also typically pay a higher rate for longer commitments, as it means they can count on that money being in place for a longer period of time. So, on average, 5-year CDs pay a higher rate than 1-year CDs.

A higher initial deposit can also sometimes earn a more lucrative return, such as with jumbo CDs requiring $50,000, $100,000 or even $250,000. But many banks don’t offer jumbo tiers, and even when they do, the incremental rate improvement is often fairly small.

The FDIC calculates a weekly national average for various CD terms across all 4,000-plus FDIC banks. This average is extremely low, but fortunately it’s easy to earn many times more than that by simply doing your homework on the best current rates.

Why Do Shorter CDs Sometimes Pay More Than Longer Ones?

The longer you’ve agreed to hold your CD funds on account without touching them, the more cost-effective it is for the bank. That’s why, in theory, banks are willing to pay you more for longer commitments than short ones.

However, many other factors come into play regarding a particular bank’s deposit strategy. They must take into account what they expect will happen to national rates in the coming months and years, as well as how much in deposit assets they need to fund the lending side of their business, and how much in certificate balances they already have on hand for different maturity timeframes.

As a result, it’s not uncommon for a bank to offer a higher rate on one or more shorter terms in its menu. All this means is that it is using the more competitive rates to attract consumers to certain terms it believes are most beneficial to its current deposits portfolio.

Are Online Bank CDs Safe?

Traditional banks have been offering CDs for decades. But the banking environment has changed with the advent of the internet. Online banks now pepper the banking landscape, as do internet-only divisions of brick-and-mortar institutions.

The good news for CD shoppers is that the type of bank offering the CD is of little importance, so long as you verify that it’s FDIC-insured. That’s because internet banks are approved, regulated, and insured in just the same way that physical banks are. So whether you deposit $25,000 in a CD at a local branch of a bank in your community, or in a bank that operates only online with no branches at all, your money is equally protected.

This is especially fortunate when you learn that online banks are often among the top-paying CD banks. Given their lack of physical branches to operate, staff, and maintain, internet banks operate with lower overhead and are therefore generally able to pay higher rates to their customers.

What If I Need My Money Early?

While it’s true that locking your funds into a CD is the reason you can earn a higher return than with other savings accounts, it’s not impossible to withdraw your money early should you need to. Of course, doing so carries financial consequences, but the option is available if the need arises.

Every bank is required to have an established early withdrawal penalty policy, and as a potential CD depositor, you are entitled to be told what the policy is before you commit to a CD. It will also be spelled out in the official disclosures you're provided when opening a CD account.

The most common calculation method banks use to determine how much penalty you’ll incur is the deduction of a certain number of months’ interest from your balance at the time of early withdrawal, with the number of months of penalty interest often increasing for longer CDs.

For example, Bank XYZ might deduct 3 months of interest if you cash out a 1-year CD early. But if your certificate has a 5-year term, the early withdrawal penalty may be 12 or more months of interest.

Each bank can set their own policy, and the penalties vary widely. Though some are mild, others are quite onerous, with some policies even potentially reducing your principal. For this reason, it’s critically important to investigate the early withdrawal penalty policy for any bank CD you’re considering. Even if you don’t anticipate needing to cash out early, any policy that can eat into principal is best avoided, and when comparing two otherwise similar certificates, choose the one with the milder penalty -- just in case.

How To Open a Cd rates today bank of america CD

Opening a certificate of deposit generally follows the same steps as opening any new bank account, and will involve more or less steps if you are a new customer cd rates today bank of america the bank or an established one.

You’ll first need to fill out an application. This is usually accomplished online, but can be done in-branch if you’re opening the certificate at a bank that operates in your community. Some banks also allow paper applications to be sent via U.S. mail.

If you’re not already a customer of the bank, you’ll need to prove your identity with photo identification. And you’ll be presented with various written account terms and disclosures that you’ll need to sign off on.

Just like with a savings or checking account, you’ll be presented with various options for making your initial deposit, whether that’s at the time of account opening or slightly later. Most banks offer transfers from another account at that bank, an external transfer from another bank, or a check that’s mailed in or submitted via mobile deposit.

Just remember that, unlike a savings or checking account, your initial CD deposit is a one-time deal. You cannot make a small deposit to open the account and then a large deposit to complete the certificate balance later. Every dollar you want committed to the CD must typically be deposited in a singular initial deposit.

As soon as you’ve completed the account opening process, it’s smart to put a reminder on your calendar a month or two before the CD will mature, so that you can think ahead about what you want to do with the money when it becomes available, and can watch your mail for a notice from your bank about how to convey your CD maturity instructions.

If you aren't looking to lock your money up for a period of time and want easier access to it, you could look at opening a high-yield savings account as an alternative. Below are some savings account options from our partners which can be competitive with the rates you can earn on CDs. It should be noted that unlike a CD, where your rate is locked in, with a savings account the bank or credit union can change your rate at any cd rates today bank of america.

Skip to main content