ADVERTISEMENT: products from our partners

How much more interest could you be earning with a CD?

Good news: CDs, or certificates of deposit, can sometimes earn you as much as 12 times more interest* than your average savings account. This means that they’re an excellent way to earn money for doing virtually nothing. Check out the 1-year offers below from our partners to find the right CD for you and start earning more interest today.

How much more interest could you be earning with a CD? From Our Partners

NerdWallet rating 


BMO Alto Certificate of Deposit
Learn more

at BMO Alto, Deposits are FDIC Insured

Minimum deposit




NerdWallet rating 


Discover Bank CD
Learn more

at Discover Bank, Member FDIC

Minimum deposit




So, what’s a CD?

CDs are savings accounts that can be likened to a locked box: You put an upfront sum in, let the money grow uninterrupted for a predetermined period of months or years, known as a term, and then withdraw with interest.

The rate of return is nearly always guaranteed upon opening a CD. This also helps protect your money against declining in value as inflation rises.

It’s a smart move to consider a CD for two reasons: to have guaranteed returns without much risk and to have a safe place for savings earmarked for future use.

Thinking in terms of the big picture: CDs fit in the cash portion of a portfolio

Here’s a broader way to think of CDs: A portfolio is your overall collection of assets, generally including stocks, bonds and cash. CDs reside as cash investments in the cash part of your portfolio, intended to be safe and used for goals within several years.

“Having around 5% or so of your overall portfolio in cash investments may make sense for long-term investors,” Rob Williams, certified financial planner and managing director of financial planning at Charles Schwab, said in an email. CDs and Treasury bills and notes can play a role as cash investments, Williams said.

Brainard, at AccessLex Institute, noted other factors to consider: “The specific allocations for stocks, bonds, and cash are generally based on an investor’s time horizon and risk tolerance, with a trend toward gradually holding more in cash and bonds as one nears and lives in retirement.”

Know a CD’s minimum

CDs have a typical minimum balance or opening requirement that’s often around $1,000, but it can range from $0 to $10,000. There are jumbo CDs, which have minimums traditionally around $100,000, though these CDs don’t necessarily have the best rates in the industry.

The minimum is more like a barrier to entry, one to heed but not to stick to as the recommended amount. You generally can’t add money to a CD after the initial deposit, so you’ll probably want to aim for an amount you don’t mind losing access to for some time and that'll earn a decent return. For a rough idea, use a CD calculator to plug in a deposit, CD term and rate. For example, $10,000 placed into a one-year CD at a 5% APY would earn $500 in interest.

3 situations when CDs work best

CDs have historically offered some of the highest guaranteed returns among bank accounts, but that doesn’t automatically make them the best home for your savings or investments.

CDs can work well in the following three scenarios:

1. Locking up savings for a near-future purchase

This may include savings for a down payment on a home or car you plan to buy within five years. Other goals might be moving to another city or going on a dream vacation. Whatever the goal, the money won’t be used until you’re ready and can stay safely out of reach in CDs. (If you have savings goals but don’t want to lose access to your money, consider high-yield savings accounts instead.)

2. Keeping some savings at a distance

CDs can be a way to stop yourself from spending an earmarked sum, whether that’s money you’ve saved up over time or a windfall such as from an inheritance. In addition, by creating a barrier to those funds with a CD, you have time to determine what to do with the money later, whether that’s investing, saving or spending it. In the meantime, your money can earn more interest than it would in a regular savings account.

3. Ensuring returns without market risk

Investing in CDs without a future purchase in mind might make sense for those who want to avoid risking their money in the stock market.

But remember that CDs are more for short-term safety than for long-term growth. For retirement savings, financial advisors often suggest an asset allocation that involves holding more stocks than bonds or CDs when retirement is decades away, and shifting to more bonds or CDs as retirement nears, to minimize the risk of losing money.

Strategies to combine flexibility and high rates

In a rising-rate environment, you might worry that the rate you lock in today won’t be as high as tomorrow’s or next year’s rate. Here are two ways to feel good about opening CDs while anticipating higher rates:

1. Use a CD ladder

This investment strategy involves splitting up your intended CD sum and putting equal amounts into multiple CDs of different term lengths at once. Usually, you get terms separated by a time frame that’s easy to remember, such as a year. A standard CD ladder consists of five CDs with terms of one year, two years, three years and so on. (The shortest ladder would be CD terms of three months, six months, nine months and so on.) When each CD ends, you can either reinvest that sum in a new CD for a longer term or withdraw it. Learn more about how CD ladders work.

2. Open a no-penalty CD

If you want to test the waters with CDs, a no-penalty CD takes away the worst part of the CD (the early withdrawal penalty) and lets you earn interest at a fixed rate. You still can’t access money regularly as you would with a regular savings account, but you can withdraw nearly at any time after the first few days. That can mean jumping to a CD with a higher rate when you’re ready. No-penalty CD terms tend to be close to one year, and rates aren’t as high as the best CD rates, but rates are comparable with high-yield savings accounts. Check out the best no-penalty CD rates.

When not to use CDs

CDs aren’t best for an emergency fund. A standard rule of thumb is to have three to six months’ living expenses in a regular savings account in case of an emergency such as losing a job. Since an emergency fund should be easily and quickly available, a savings account is generally better for that money than CDs. Also, if you withdraw from a CD early, there’s usually a penalty equal to months or years of interest.

CDs aren’t for long-term savings either. When saving for retirement, a general rule is to invest 10% to 15% of your income each year or build up to that amount. Investing vehicles can include an individual retirement account or an employer-sponsored account such as a 401(k). And the money is often invested in some combination of stocks and bonds, which can have higher average returns than CDs.

CDs tend to work for savings not intended for emergencies or retirement. The best CD rates tend to be at online-focused institutions. “For mid-term goals like saving for large purchases or wanting to keep pace with normal inflation, some online bank CDs and brokered CDs are finally becoming nice landing places for those dollars now that interest rates have risen,” Derek Brainard, director of financial education at the AccessLex Institute, said in an email. AccessLex is a nonprofit that helps law students with money advice.


*The national average annual percentage yield ("APY") is listed as 0.45% as reported by the Federal Deposit Insurance Corporation as of September 18, 2023 .

**12x more interest based on the national average annual percentage yield ("APY") of 0.45% (as reported by the Federal Deposit Insurance Corporation as of September 18, 2023) as compared to online banks with interest-bearing savings account APYs of 0.40% or more. Estimated annual earnings result assumes principal and interest remain on deposit for one year and interest rates and APY do not change. Estimated annual earnings are for informational purposes only. Interest rates and APY are subject to change and specific results cannot be guaranteed.

To recap our selections...

NerdWallet's How much more interest could you be earning with a CD?