Our experts answer readers' banking questions and write unbiased product reviews (here's how we assess banking products). In some cases, we receive a commission from our partners; however, our opinions are our own. Terms apply to offers listed on this page.
Renata Angerami/Getty Images
- There isn't a set CD opening deposit that works for all; it depends on your goals and finances.
- When depositing money into a CD, be mindful of any opening requirements or penalties.
- Make sure you're banking with a financial institution you trust and that your money is federally insured.
The best CD rates pay well above 4.50% APY in a variety of term lengths. Due to significant changes in interest rates over the last year, traditional CDs have become a more appealing option for money that isn't needed right away. But deciding how much money to deposit in this fixed-rate bank account may be a question on your mind.
To get a better idea of how much to deposit up front, here are four tips to keep in mind before you open a CD.
4 tips to help you decide how much money to put into a CD
1. Figure out what you want to save money for.
Before you open a CD, financial experts recommend having a clear goal and timeline; CDs are also best for saving money for short-term goals or a supplemental cash reserve. For example, you could consider putting your savings in a CD if you'd like to plan a home renovation or travel for a future holiday.
"It can be a great way to get interest, but it's not necessarily the best tool for all goals," points out Elizabeth Plot, CFP and founder of Primas Financial Planning. "If you're looking at this as an emergency fund, a CD should be an extension of an emergency fund, but not where you keep any money that you really want."
Having a specific goal with a timeframe can provide a clear guideline for how much money to deposit initially. If you need help setting up a timeframe for a goal, you could use a compound interest calculator to see how much interest you may earn over time.
Traditional CDs will not allow you to deposit money during a term; you'll have to wait to make additional deposits once a CD reaches maturity. Also, be aware CDs generally compound interest daily or monthly, depending on the financial institution.
2. Consider whether CD minimum balance requirements will factor into your CD options.
A minimum balance requirement is a set amount needed to maintain an account. At financial institutions, the typical CD minimum balance requirement is $1,000. However, the range of minimum balance requirements can vary widely between financial institutions. For example, a Popular Direct CD requires at least $10,000, while an Ally or Barclays CD does not require a minimum deposit to open.
When choosing a CD, Patrina Dixon, CFEI, RFC, and owner of P. Dixon Consulting, LLC, recommends paying attention to more than which bank offers the highest rate.
"If your income and expenses do not dictate that you have the money to invest $5,000 into a CD, even though you're going to get a return in, say 12 months, then you can't do $5,000. Look for a CD that has a lesser required amount in order for you to still gain money from having money in a CD," says Dixon.
3. Determine how much money you can realistically set aside to avoid early withdrawal penalties.
CDs differ from other types of savings accounts because they have early withdrawal penalties.
An early withdrawal penalty is a fee you'll have to pay if you withdraw money from the account during the term. Plot suggests looking at your finances as a whole, before deciding on a CD.
"You're locking up your money for a long period of time, so you really want to make sure that, if possible, you don't have to withdraw it for that time," says Plot.
4. Make sure your money is covered by federal insurance.
The NCUA and FDIC protect bank accounts for up to $250,000 per depositor, per category. If a bank or credit union shut down suddenly, your insured money would be safe.
"If you deposit $1,000, and the institution is FDIC-insured, that dollar amount is within the amount of money that the government will insure," explains Dixon. "If you are well over, something that is not within the FDIC insurance realm, then you run the risk of only getting up to the amount that they insure."
For example, if you opened a CD by yourself with $275,000, then $25,000 is uninsured. If your bank fails, you'll receive a Receiver's Certificate because you had an amount that exceeded $250,000. A Receiver's Certificate allows you to claim funds once the bank's assets are liquidated. However, it isn't guaranteed that you'll get your uninsured money back.
CD Minimum Balance Deposit FAQs
Do higher CD deposits have higher interest rates?
Sometimes if you deposit more money into a CD, you'll be able to get a higher rate. However, this isn't something that occurs at all financial institutions. A few examples include Quorum Federal Credit Union, Connexus Federal Credit Union, and Consumers Federal Credit Union.
What is the minimum deposit for a CD?
Generally, financial institutions require a minimum of $1,000 to open a CD. However, some financial institutions may let you open a CD with $0.
Do CDs have a maximum deposit?
Generally, you'll want to keep a maximum of $250,000 in an individual CD or $500,000 in a joint account. A few financial institutions may also impose limits on how much money you can deposit into an account. This will be specified in the terms of a CD before you open an account.