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A bank certificate of deposit (CD) is a federally insured,1 secure savings account that has a fixed interest rate for a fixed amount of time, called a term. CDs are a low-risk account you can use to earn more interest than you would in most savings accounts. CDs are considered low risk because, like savings accounts, they are FDIC-insured up to $250,000.

CDs usually don’t have monthly fees, but they do impose fees if funds are accessed before the term ends on the maturity date.

How does a certificate of deposit (CD) work?

First, let’s list out the important features of a CD, including the interest rate, a percentage of the principal (that’s the amount deposited in the account) can earn, usually expressed as an Annual Percentage Yield (APY); and the term, the amount of time the CD will be open for.

CDs offer a set rate of return in exchange for holding your money for a certain amount of time, or term. Typically, the longer the term, the higher the interest rate. And, rates for CDs are usually higher than what you’ll find in savings accounts. Once the term ends, you can access your money without restrictions.

What are the differences between CDs and other savings accounts?

There are two key differences between traditional savings accounts and CDs:

  • CDs typically earn higher interest than savings accounts and usually, the longer the term, the higher that interest rate is. With CDs, you trade access to your full principal deposit (that’s the amount you originally deposit) for higher interest compared to most savings accounts.
  • Unlike savings accounts, CDs do not allow you to access all the money in your account until the term ends. Withdrawing your principal from the CD before it matures will trigger a considerable fee. Usually, you can withdraw accrued interest at any time during the CD term without a penalty.

Both CD and savings accounts can help you reach your savings goals. While you trade access to your money for the typically higher rate of a CD, you can also enjoy the security of knowing your rate is locked in. And, though savings accounts allow for easier access to your money, their interest rates may fluctuate with the market, impacting potential yields.

What is a CD maturity date?

A CD's maturity date is the date when the CD’s term ends. Once the terms ends, you can take your money out of the CD without paying early withdrawal penalties.

What happens to my CD at maturity?

Here’s what to expect when your CD matures. First, you’ll get something called a maturity notice from the bank holding your CD. The bank is required to send it to you shortly before the maturity date, and it will include all the information you need, including the:

  • Maturity date of your CD
  • Explanation of what happens by default, if you don’t take any action with the CD (typically the CD will renew, or roll over to another CD)
  • Rate for renewing the CD, which may be different from the rate you started with
  • Maturity date that will be set for a renewed CD
  • Date by which you can do something other than renew

Usually, the default action for a bank will be to renew the CD. That means that if they don’t hear from you by the date included in your notice, they’ll put your money into another CD. It will typically have the same term length as your previous CD. Remember, rates change, and the new rate may be lower or higher than your previous rate. So when your CD matures, you can:

  • Let the CD renew with the terms the bank sets
  • Close that CD and take the money to spend, save or invest

Why should I get a certificate of deposit?

You should open a CD when you know you won’t need to access your deposit until the term ends. CDs help you save on a schedule with low risk and a return you can plan for, all without the monthly fees you might get with a savings account.

You’ll be able to choose a long-term CD or short-term CD based on your own savings goals and timelines of your financial commitments.

Are CDs worth it?

Because many CDs earn higher interest than other savings accounts, and give you a return you can count on, they are a secure, low-risk savings option. They’re worth it when you know you can put your deposit aside and not access it until the term ends. If you access it before the maturity date, you’ll pay fees, and they can be high. And to take advantage of the highest interest rate, you’ll often need to lock away your deposit for a longer term. If you’re thinking of a short-term CD, you might be able to find a comparable interest rate from a traditional savings account and keep the access to your money. Be sure to consider all the options available to you for saving or investing your funds. Explore KeyBank's CDs and compare CD options that best fit your financial goals. Be sure to consider the other options available to you for saving or investing your funds. Explore KeyBank's CDs and compare CD options.

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Federal Deposit Insurance Corporation (FDIC) deposit insurance covers the depositors of a failed FDIC-insured depository institution dollar-for-dollar, principal plus any interest accrued or due to the depositor, through the date of default, up to at least $250,000. In many cases, insurance can extend beyond $250,000 based on several factors including ownership capacity on each deposit account. As a Member of the FDIC, deposits at KeyBank, N.A. are insured by the FDIC.

For additional information about FDIC deposit insurance as well as coverage of specific types of accounts, please visit www.fdic.gov/deposit or call 1-877-ASK-FDIC.