How do CDs work?

Looking to put your money somewhere other than an everyday bank account?

Say you have a checking and a savings account — both solid choices to kick-off your personal finance journey — and are looking for more ways to save and earn money. There are a lot of financial products available, such as money market accounts and individual retirement accounts (IRAs). But if you’re looking for a place to keep your money — and earn a higher-than-average interest rate on it — consider a Quontic Certificate of Deposit.

With a certificate of deposit, you can securely store your cash and watch it grow. In this article, we’ll explore the pros and cons of opening one, current market interest rates (and how Quontic compares) and more.

What’s a Certificate of Deposit?

A certificate of deposit, or CD, is a savings vehicle where you keep your money for a set number of months or years at a fixed annual percentage yield (APY). This set number of months is referred to as a “term.”

In exchange for putting your money in this CD for a period of time, you’ll earn a certain APY. On your CD’s maturity date, which is at the end of your term, you can withdraw both your principal and interest. But it’s essential you don’t withdraw your money before the end of your term length, or else you may pay a penalty (more on that later).

Term lengths are variable across the board, from as low as one month to 10 years. Rates tend to go up along with the term length, so your mileage with CDs — depending on how much money you want to open with and keep it in there — may vary.

Generally, there are lower interest rates available on the market today. However, it’s another secure place for you to save your money. Depending on where you go, a certificate of deposit might have an edge over high-interest accounts, and could be a good option for your emergency fund and other savings goals.

What are the Types of Certificates of Deposit?

There are many different types of CDs. Most banks offer a “regular” or traditional certificate of deposit, which is the kind we’re focusing on in this article. Additionally, there are other types of CDs, according to Forbes Advisor:

  • Jumbo CD
  • No-penalty CD
  • Bump-up CD
  • Step-up CD
  • IRA CD
  • Brokered CD
  • High-yield CD
  • Foreign currency CD
  • Add-on CD
  • Zero-coupon CD

These CDs work in slightly different ways, and each certificate of deposit has its own pros and cons. For instance, a brokered CD may offer higher interest rates, but you may lose money by selling it for less than you paid for it if you sell it before its maturity date.

You can also open a few different CDs. From there, you can build a CD ladder, which is a strategy where you spread your money across CDs with different term lengths to take advantage of higher interest rates.

What to Consider When Opening a CD

You can open a CD at most online and brick-and-mortar banks, financial institutions and credit unions. You can choose a short-term or long-term CD, and you may need to open the account with a specific initial deposit.

Before you open a certificate of deposit, consider the following:

  • What the “down payment” or minimum deposit amount is (it usually ranges from $0 to several hundred).
  • The amount of interest you get (and how it compounds) with different term lengths (and if they’re tiered).
  • What length of time you can reasonably commit to with a CD (and whether another bank account might be a better option for your situation).

Important to note: You may pay an early withdrawal penalty if you take out your money ahead of the maturity date. This penalty will vary by bank and the term length. For example, you might owe 60 days’ worth of interest on a 1-year CD when you take out the money early. So, keep this in mind when you’re considering a shorter-term or longer-term CD length,

What are the Benefits of a Certificate of Deposit?

CDs are another tool for you to safely save and grow your money. It’s also predictable; when you sign on for a CD with a particular APY, you’ll have this rate throughout your entire term. If you can part with your money for a set amount of time, you’ll be rewarded with earned interest on it.

Of course, if you don’t think you can wait until a term ends, a regular savings account or high-yield savings account that offers more flexibility may be a better fit for you.

What are Rates Like for CDs?

Rates can vary in general, and also according to different factors. For instance, an online bank might offer a higher rate for a six-month traditional CD than your local credit union. You might be eligible for a higher APY if you put more money in it or go with a longer term, too.

Today, the average rate, nationally, is 0.27% APY for a six-month CD and 0.54% APY for a three-year CD1, to give you a range.

How a Quontic CD Works

If you’re looking to open a CD at an online bank, plus one with a higher-than-average interest rate, check out the Quontic Certificate of Deposit. With Quontic, you can earn up to 3.20% APY3 with an FDIC-insured2 CD.

Quontic offers CDs with different term lengths and APYs. For example:

  • 6 months and 1.70% APY3.
  • 1 year and 2.50% APY3.
  • 2 years and 2.80% APY3.
  • 3 years and 3.00% APY3.
  • 5 years and 3.20% APY3.

Quontic’s highest offer is five years at 3.20% APY3. Interest is compounded daily and added to your account every month.

To get started, you need:

  • To be at least 18 years old.
  • Have a minimum $500 opening deposit.

You’ll also be asked to share your basic contact information, social security number and date of birth. The entire process takes about three minutes — then you’ll be ready to fund your account.

If you can afford to part with an amount of money — however temporarily, depending on the term length you choose — and put it into a CD at a fixed interest rate, it’s another well-rounded savings option for you.

Certificate of Deposit FAQs

Here are answers to some popular questions regarding CDs.

Is a CD a Savings Account?

A CD is a type of savings vehicle, though there are a few key differences. With traditional CDs, you won’t pay monthly maintenance fees, and you’ll have a fixed rate and term. With traditional savings accounts, you may have to pay regular fees, interest rates might fluctuate and you’ll have more flexible access to your money.

Depending on your needs and goals, you may prefer one type of account over another.

Where Can You Get a Certificate of Deposit?

You can open a CD at both brick-and-mortar and online banks, credit unions and other financial institutions. Check out a local branch or look online to see if your bank-of-choice offers certificates of deposit.

Is Money Safe in a CD?

Yes. As long as your account is insured by the National Credit Union Administration (NCUA4) for credit unions or the Federal Deposit Insurance Corporation (FDIC2) for banks, your money is federally protected up to $250,000.

Can You Lose Money in a CD?

Generally, no. While your money may grow slowly in a CD (and might not keep up with inflation), you won’t lose the money you put in it. With that said, other CDs have different terms and conditions, and you want to be considerate of them before proceeding with an account.

CDs: Another Savings Option

A certificate of deposit is a good option if you’re looking for more savings vehicles for your money. Whether you want to hold your money for five months or five years, you can securely grow it and earn some interest on it.

If you’re ready to open a CD, consider a Quontic Certificate of Deposit so you earn up to 3.20% APY3 for a five year CD on your money.


1National Average APY information as of August 26, 2022, according to the FDIC National Rates and Rate Caps. https://www.fdic.gov/resources/bankers/national-rates/index.html

2FDIC insurance is applicable to eligible deposit accounts and up to the maximum allowed by law . Learn more at FDIC: Deposit Insurance https://www.fdic.gov/resources/deposit-insurance/.

3Certificate of Deposit – Ask for details. Minimum $500 to open account. Withdrawals before the maturity date are subject to penalties. Fees could reduce earnings. Additional terms, conditions, fees & exclusions may apply. APY means Annual Percentage Yield. Information is as of August 26, 2022.

4Learn more about NCUA insured accounts, which are  applicable to eligible accounts and up to the maximum allowed. https://www.mycreditunion.gov/share-insurance

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