How much money should you keep in a CD?

The Good Brigade/Getty Images

How much should you keep in a CD?

If you’re considering a certificate of deposit (CD), you may be thinking about how much you should keep in one. But it depends on many different factors, such as where you’re opening your account, your financial goals and how much money you have.

The amount of money you should keep in a certificate of deposit (CD) depends on important factors, such as:

• You should save enough money to at least meet the CD’s minimum requirement to open the account.
• You need to be confident this money won’t be needed during the CD’s term. Otherwise, you’ll likely incur an early withdrawal penalty.
• If you’re saving for a shorter-term goal, such as a down payment on a home, deposit enough money to reach that goal, or to even hit the goal from interest earned on the CD.
• You may want to save a smaller portion of your money in CDs and instead consider other investments that have the potential to earn much higher returns over time if you’re saving for a longer-term goal, such as retirement.

Your financial goals, current savings, high-interest debt and time horizon will help you determine 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, though some have no minimum deposit requirements.

Here are the minimum deposit requirements for some major banks.

Note: Minimum deposits shown above are as of Aug. 20, 2024.

It’s important to note that some financial institutions offer tiered interest rates. This means that consumers can earn higher interest rates by meeting higher minimum deposit amounts.

Also, keep in mind that there may be different minimums for various types of CDs, such as no-penalty or bump-up CDs.

Jumbo CDs vs. traditional CDs

You may benefit from a jumbo CD if you’re looking to deposit $95,000 or more. Jumbo CDs generally require at least a $95,000 deposit. Locking that money up for a year or two could be beneficial to someone who may otherwise be tempted to spend it. Like any type of CD, you’ll want to make sure the money will stay in the CD for its term.

Jumbo CDs aren’t that common, but you’ll be able to find them at some banks and credit unions. You’ll either see them called a jumbo CD or see a rate tier of $95,000 or more with a higher yield.

Just because they’re called jumbo CDs doesn’t mean the yield will be “jumbo” as well. Some banks pay the same yield on their jumbo CDs as they do with their traditional CDs with the same terms. A bank that pays a competitive yield on all balances might have a higher annual percentage yield (APY) than a CD marketed as a jumbo CD.

Compare CD rates if you’re looking for a jumbo CD to make sure you’re getting a better rate for depositing a larger amount.

How many CDs can you have?

There is no limit to how many CDs you can have at once, although some institutions may limit how many you can have at each.

Your savings strategy might determine how many CDs you want to open. You may want multiple CDs if:

• You want to maximize the APY but stagger the maturity date
• You want to start a CD ladder
• You have a large lump sum to break up over many different savings vehicles, including CDs

Even though there isn’t a limit to how many CDs you can have, you may want to spread out your cash into multiple types of investments so you’re not keeping your money all in one place. And keep Federal Deposit Insurance Corp. (FDIC) insurance in mind, where money is safe for up to a limit of $250,000 per depositor, per FDIC-insured bank, per ownership category.

Be careful not to lock up too much money

CDs offer a guaranteed rate of return and an opportunity to boost your savings if you keep the account until it matures. Since it’s difficult to predict what the interest rate environment will be in the future, you wouldn’t want to put too much money in a long-term CD in case rates increase. One option for keeping up with potential rate gains is building a CD ladder.

Not keeping up with inflation is also a potential concern when you have money locked in at a certain yield. With inflation outpacing yields, it might be worth investing your money elsewhere or focusing on paying down debt instead. Though it’s possible that a fixed CD yield now could outpace inflation in the future.

Another issue: Insurance provided by the FDIC and the National Credit Union Association is limited to $250,000, per depositor, per insured bank (per insured credit union for an NCUA credit union), per ownership category. Someone hoping to put more than a quarter of a million dollars in a jumbo CD runs the risk of losing money if their bank fails.

Interest attained by investing in CDs is also taxable, another reason why you want to earn the highest yield possible — to make up for taxes on your gain.

“If the jumbo CD is not held in a tax-deferred retirement account, taxes from interest will dampen the return and purchasing power even more,” says Alano Massi, certified financial planner and managing director for Palm Capital Management in Westlake, California.

What’s more, once you tie up your money in a CD, you’re stuck until it comes due, unless you don’t mind paying an early withdrawal penalty.

— Former Bankrate writer René Bennett contributed to a previous version of this story.